When General Electric announced in 2021 that it would be separating into three businesses—GE HealthCare, GE Aviation, and GE Vernova—the new companies’ treasury teams faced a huge amount of work. Historically, core treasury activities had been centralized within GE corporate, but each of the divested companies would need its own treasury organization, optimized to serve the needs of its business.
GE HealthCare (GEHC) manufactures MRI and CT scan machines; ultrasound equipment; and contrast media, such as dyes that patients ingest to help doctors understand what is happening inside their bodies. GEHC sells these devices to hospitals, clinics, universities, and research facilities around the world.
“We serve the entire spectrum of the medical industry,” says treasury operations manager Andrew Walecka. “We do business in 160 countries and have material FX [foreign exchange] exposure across 40 currencies.” As GEHC was preparing to spin off from GE, its FX hedge portfolio totaled $16 billion. These hedges derived from two primary types of exposure.
“The first area of currency risk is our long-term P&L,” Walecka explains. “Depending on where we sell goods and where we manufacture them, we may have a net risk to earnings based on our currency profile until we recognize revenue and expenses. So we hedge that P&L risk over a period ranging from three months to six quarters.
“The second leg of our currency risk management is our balance sheet hedging program,” he continues. “In just about every country, we have legal entities with some sort of remeasurement risk. Prior to this project, we would hedge all those risks one-to-one and go to Wall Street with a lot of trades. We might have dollar entities going to the Street with their euro exposures and euro entities going to the Street with dollar exposures. We had a very grossed up set of derivatives, which we needed to resolve as we stood up our new treasury function.”
Walecka and his colleagues decided that a many-to-one approach would improve the efficiency of hedging operations for the newly independent GEHC. “Reducing our derivative notional was a priority for our treasurer,” Walecka says. “We decided to build out our FX risk management to aggregate exposures and go to the Street with fewer external trades, carving out internal trades as appropriate. To reach this end state, we needed to undertake an end-to-end overhaul across resources, processes, and technology.”
As GEHC’s treasury team designed their desired future state, it became clear that deploying the right technology would be crucial, especially since the team would be leaner after the divestiture. “Mother GE had a variety of exposure-management tools, many of which were custom and homegrown, that had built up over time,” Walecka says. “We couldn’t take those tools with us, nor were we going to have the IT infrastructure to support an array of highly customized tools.”
Increasing the challenge, the new company had less than a year to build out the treasury—and currency risk management—function. Through workshops with key stakeholders, the treasury team defined a set of detailed requirements. Then they participated in demos for various FX risk management solutions and assessed them using a predefined scorecard. In the end, the team selected AtlasFX and worked with AtlasFX and PwC to tailor the solution to GEHC’s unique needs.
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