Decision support and financial forecasting software : The DeftHedge SaaS solution
The DeftHedge DNA
Take charge of your risk management.
We created DeftHedge to help companies manage their financial risks inherent to currency and/or commodity risks. DeftHedge provides expertise to senior management, finance departments, treasurers, accountants, buyers, etc., all of whom are impacted by currency or commodity risks.
DeftHedge helps companies insure themselves against foreign exchange and commodity risk. We disseminate best practices and hedging techniques to protect your margins from the volatility and unpredictability of markets.
Markets
Identifiy financial risks
Geopolitical, economic, health and demographic events have a direct impact on financial markets.
The international financial environment is experiencing strong variations in the foreign exchange and commodities markets. It is difficult for companies to anticipate these erratic movements which directly impact their sales, purchases and therefore their gross margins.
Experience shows that major currencies fluctuate up or down by about 10% per year. While we see even greater volatility in commodity prices, their volatility averages around 30% over a 90-day horizon. For example, Brent crude oil has varied by 300% in 1 year, Nickel has varied by 60% in 6 months, CO2 has also fluctuated over the same period by 70%, …
It is therefore important to identify the financial risks that can strongly influence the company’s results. We should not underestimate the correlation between currency risks and commodity risks. They are intimately linked. For example, oil is linked to the US dollar (USD), iron ore to the Australian dollar (AUD), gold to the Indian rupee (INR), agricultural raw materials to the Canadian dollar (CAD), etc.
To summarize, currency and/or commodity risks are important because of their magnitude and their probability of occurrence. These risks affect the value and profitability of companies, whether they are financial, industrial or commercial.
Know your exposure
Identifying risks is an essential, but not sufficient, prerequisite for any management. There are four main sources of financial risk :
- Those arising from industrial and commercial operations, commonly referred to as industrial and commercial risks
- Those directly linked to the functioning of financial markets and their operations
- Those inherent to operational techniques and operators
- And those attributable to management methods.
Don’t lose money due to financial market fluctuations
An approach to hedging foreign exchange risk
An economic approach, hedging operations (forward transaction, vanilla option) aim to protect the company against random market fluctuations that could penalize its results or reduce the value of its assets. It allows to compensate or reduce potential losses that the company could suffer on the spot market, on the day of the purchase or sale of its real asset. In this approach, the objective is to protect the asset from possible exchange rate fluctuations. The company does not seek to make a gain but to protect its margin.
When the hedging transaction is unwound, the company will pay or receive the price guaranteed by the hedging instrument. If market conditions are unfavorable at the time of unwinding, the company will be satisfied with its hedge. On the other hand, if market conditions are favorable, the company will have missed out on a profit. No one could have known or guessed the price levels at the outset. The company covered its margin.
An evolving and efficient methodology
The dynamic hedging strategy, these objectives are multiple and complementary :
- To cover the entire position to be managed
- To systematically protect the target price / reference price / worst case price / budget price
- To keep enough flexibility to take advantage of favorable evolutions or to absorb the risks on the amounts to be managed
Under these conditions, building a strategy within the framework of dynamic management means combining different available hedging instruments in order to meet the three criteria mentioned above. The choice of instruments and their respective weighting in the strategy will condition the quality and efficiency of the dynamic management.
How ?
The simplest strategy is to combine futures trading with what might be called “stop-losses”. These are predetermined parity levels which, if reached, should trigger forward trades.
Example of strategy :
- 30% of the position to be hedged sold forward at market conditions i.e. 1.20 EUR/USD
- 70% of the position kept open but protected by the following stop losses
- 20% to be sold forward if the price reaches 1.18 EUR/USD
- 25% to be sold forward if the price reaches 1.16 EUR/USD
What is the DeftHedge SaaS solution?
DeftHedge trains you, we give you the keys to manage your currency and commodity risks
SaaS software to manage foreign currency cash flow and hedging. DeftHedge is a SaaS reporting and decision support solution for managing foreign exchange risk in companies. The application structures all relevant information and business know-how to automate the process of monitoring and managing foreign exchange risk.
The objective is to allow our users to measure and control negative currency variations, to make information more reliable, to homogenize reporting while saving time in the implementation of strategies.
A SaaS software for decision support and financial forecasting.
DeftHedge relies on financial risk management experts to provide access to currency hedging tools, reporting and techniques through SaaS software. The SaaS software allows you to run simulations, create scenarios and make sound financial forecasts.
If you are a small business,
DeftHedge helps you reduce your management costs and protect your margins from currency volatility.
If you are a small or medium-sized business,
DeftHedge helps you manage your daily foreign exchange risks and make the right decisions. DeftHedge is a decision support software that allows you to analyze and make the right choice.
If you are a large group,
DeftHedge provides a complete risk management software that facilitates the relationship between the HQ and the Subsidiaries, offers the ability to establish instant consolidated reporting, meets international accounting standards (IFRS, French Gaap), facilitates teamwork, offers both economic and accounting management, …
The DEFTHEDGE solution is hosted by Microsoft Azure : Microsoft is the industry leader in establishing and consistently meeting specific security and privacy requirements. Azure meets a broad set of international and industry-specific compliance standards such as ISO 27001, HIPAA, FedRAMP, SOC 1 and SOC 2, as well as country-specific standards such as Australia’s IRAP, the UK’s G-Cloud and Singapore’s MTCS. Third-party audits, such as the British Standards Institute, verify that Azure meets the strict security controls that these standards require. The market data used comes from a number of reputable, quality providers.
Your “assistant” dedicated to currencies and raw materials
DeftHedge, the tool that manages currencies and commodities for you.
- Automate your daily management.
- Create effective strategies quickly.
- Centralize and secure your information.
- Save time and money.
Our web application offers two levels of reading, an economic monitoring to protect your margins and an accounting monitoring to evaluate the impact of these risks on your accounting.
Our “SmartStrategy” simulator suggests coverage strategies according to predefined management constraints. Allows you to quickly create new hedging strategies. Allows you to visualize the impact of a new strategy on your exposure in one click.
The advantages of our software dedicated to the foreign exchange and commodities market treasury
Financial
Protect margins & financial projections
Control/decrease bank margins
Analyze and neutralize foreign exchange losses
Resource optimization
External
Rebalancing of the banking relationship (reducing information asymmetry)
No need to follow the markets on a daily basis
Better understanding of hedging tools
Increased negotiating power with clients / suppliers
Internal
Centralization of management
Data and process security
Organization and separation of tasks
Automation of the risk function (API, CSV, etc.)
Management
Accelerated decision making
Targeted and effective intervention
Better understanding of risks
Rapid implementation of strategies & action plans
Examples of problems solved :
- How to control and reduce bank margins ?
DeftHedge provides a pricing tool to negotiate bank margins.
- How to build your foreign exchange exposure ?
DeftHedge ranks your exposures and organizes your information.
- Understand accounting foreign exchange losses ?
DeftHedge produces detailed reporting of foreign exchange gains or losses and automatically matches your invoices / payments to your hedges.
- How to defend your gross margin ?
DeftHedge provides a dynamic management methodology to defend your margin from market volatility.
100 %
Precise vision of exchange rate and commodities risks
70 %
Monthly time saved
25%
Saving margins
10%
Gains on all positions
The functionalities
OPERATION
Enter foreign exchange transactions, benchmark the rates and/or valuations given by financial counterparties. (futures, options, …)
EXPOSURE
Enter/import a forecast exposure, invoices and payments. Displays the net position to be managed.
REPORTING
Displays the essential information for piloting. Instantly calculates unfavorable and favorable scenarios.
ALERTs
Configure intervention levels to protect exposure.
CHAT
An experienced team available to answer your questions.
SMARTSTRATEGY
Create strategies or make coverage projections.
options
Valuation
Valuation of complex operations (barrier options, accumulators, …)
Accounting
Calculation of accounting exchange rate impacts.
Matching
Automatic backing of invoices/payments to covers.
Consolidation
Consolidation of the company’s foreign exchange positions.
Expert Mode
Compliance with IFRS 9 / IFRS 13 / Sensitivity of positions
Support
Training and assistance in setting up DeftHedge. Assistance in the creation and implementation of strategies.