World-Class Treasury Starts With a Strategic Lens

# Foreign Exchange

# Technology

# Office of the CFO

Former HP treasurer Zac Nesper shares questions that unlock corporate treasury’s full value to the enterprise. Today’s focus: FX risk management.

Zac Nesper

Editor’s note: Former NeuGroup member Zac Nesper’s treasury career includes 20 years of experience in corporate finance at HP, with stints in FP&A and multiple treasury roles before he became treasurer in 2018. Among other challenges, he led HP’s treasury separation over nine months into two companies large enough for the Fortune 50, dealt with fallout from the pandemic, and helped defeat a hostile takeover attempt by Carl Icahn. The gap between an adequate treasury function and one that is world class rarely comes down to technical capability. Many teams can execute cash positioning, hedging, capital markets and risk management. My goal as a treasurer has always been to understand dynamics of the business at a deep level and be the bridge to translate that into world-class strategies aligned with the objectives of my CEO, CFO and board. The real differentiator is how effectively the treasurer connects deep business understanding to treasury strategy. When treasury is anchored in the economics of the business—customer behavior, competitive dynamics, supply chain realities, secular shifts and the company’s long-term strategic posture—everything changes. Liquidity planning becomes sharper. Capital structure becomes a competitive weapon. Risk management becomes proactive instead of reactive. And in volatile markets, that integration becomes a true advantage. The mindset shift CEOs, CFOs and treasurers must adopt is simple but powerful: Treasury isn’t just a control function—it’s a strategic lens on the business. The more the treasurer understands the business, the more value treasury creates. World class treasury starts with that lens. In this series, I will share 10 questions on a variety of treasury topics that I believe every CFO, CEO, board member and treasurer in a position to focus this lens should be asking—questions that elevate the function from operational to strategic, and help leaders unlock the full value treasury can deliver. I focus today on foreign exchange risk management, adding an insight or “pro tip” after each question.

Zac Nesper

Foreign Exchange HP, where I spent two decades, had one of the most sophisticated FX hedging programs in the world, staffed by a full team of strategists and traders. We fully understood the interaction of country-by-country exposures and market dynamics, pricing, contractual terms, competitive dynamics, market instruments, correlations and investor risk appetite. That provided the company with significant protection through several currency crises and periods of market volatility, providing the board and investors with confidence. Here are 10 Strategic FX questions (some are multipart) for CFOs, treasurers and boards looking to drive real value and investor confidence in the strength of a company’s FX risk management. Macro, Policy & Global Monetary Regimes

1. Which currencies drive our largest exposures and how vulnerable are we to diverging global monetary policies or major political shifts? Pro tip: Strategic FX management starts with the basics of exposure and risk. You must know where you are exposed before you can mitigate the risk.

2. How would a prolonged period of strong or weak functional currency change our revenue mix, competitiveness and capital allocation? How long does our hedge program realistically protect us, and have we modeled a 10–20% swing in both directions? Pro tip: A prolonged move reprices your entire P&L—revenue mix, input costs and competitive position. Model a 10–20% swing in both directions and know exactly how many quarters your hedges protect your earnings and cash flow. Then assess if your business can adjust in that horizon and if you are competitively advantaged or disadvantaged.

Governance, Capital Structure, Liquidity & Funding Strategy

3. Is our debt and liquidity mix aligned with our currency exposures or are we carrying structural FX mismatches we could fix by changing our operational footprint? Pro tip: Natural hedges achieved through local-currency debt or operational footprint changes can reduce notional hedge volumes and structurally lower risk. If your debt stack doesn’t mirror your exposure map, you may be leaving durable risk reduction on the table and paying for hedges you don’t really need. 4. How do investors react to FX impacts in our sector and does our approach to hedging strategy support the guidance and expectations we set? Is the way we have conditioned investors optimal? Pro tip: Investors price FX volatility differently by sector. A hedging program that smooths reported results can build credibility with analysts and improve your price/earnings multiple. However, some companies have found success by conditioning the Street to look through FX volatility and manage it within their own investment portfolio. Define your objective and conditioning strategy and be ready to be held accountable for what you choose.

5. Are we relying on funding currencies that could become expensive or unstable, and how resilient is our liquidity if one of them dislocates? Pro tip: Concentration in a single funding currency is a hidden liquidity risk. Stress-test what happens if swap markets seize or basis costs spike—diversified funding, including intercompany options, buys you time when markets dislocate.

Commercial, Supply Chain & Pricing Strategy

6. How do the functional currencies of competitors and FX swings affect our pricing power and competitiveness, and how quickly can we reprice or recontract when conditions shift? Pro tip: If a key competitor reports in a weakening currency, an FX move can hand them a pricing advantage overnight. Understanding competitor functional currencies and building repricing speed into contracts turns FX awareness into a competitive weapon.

7. Where are suppliers exposed to FX volatility and could their currency risk become an indirect cost or operational risk for us? Pro tip: Supplier FX stress can lead to price increases, delivery delays or quality issues. Mapping your supply chain’s currency exposure and contract terms turns a blind spot into a manageable risk.

Risk, Hedging Philosophy & Governance

8. Do our hedging policies reflect today’s volatility regime or are they anchored to outdated assumptions about mean reversion or correlations? Are we unintentionally speculating? Pro tip: Volatility regimes shift faster than policy manuals. If your hedge ratios and tenor assumptions haven’t been recalibrated for the current environment, the program may be creating risk rather than reducing it. Relying on correlations for protection can be a hidden form of speculation.

Technology, Data & FX Market Structure

9. Which analytics, automation or AI investments would materially improve our ability to forecast, price, contractually adjust or hedge FX risk? Pro tip: Automation and AI can compress the time spent building forecasts and running scenarios, freeing the team to focus on strategy, instruments, and trading optimization—where the real value lies.

10. Do we have sufficient counterparty diversification and/or stress-tested collateral programs in place? Are we bidding out all material transactions on a liquid platform? Pro tip: Counterparty concentration and opaque execution are avoidable risks. Diversifying counterparties and bidding all material trades on an electronic platform improve pricing transparency and strengthen your negotiating position. Banks are happy to seamlessly execute trades on noncompetitive platforms. But if it seems too good to be true…

World-Class Treasury Starts With a Strategic Lens

Former HP treasurer Zac Nesper shares questions that unlock corporate treasury’s full value to the enterprise. Today’s focus: FX risk management.

Popular

Related