Milestone map
Milestone map
3 milestones
Map a Real Company's FX Exposure and Identify Risk Dimensions
2–3 weeks
Select a real multinational company (ideally one you work with or a publicly listed company with clear international revenue disclosure). Map the company's foreign exchange exposure across three dimensions: transaction exposure (foreign currency receivables and payables), translation exposure (consolidation of foreign subsidiary results), and economic exposure (the impact of exchange rate changes on competitive position).
Proof required
Submit: (a) the chosen company and its international revenue breakdown from the most recent annual report, (b) a FX exposure map covering all three dimensions with specific evidence from the annual report or 10-K disclosures (most annual reports include risk factor disclosures on FX), and (c) identification of the two or three currency pairs that represent the greatest risk to this company and the direction of that risk (strengthening or weakening of which currency creates the problem).
What gets checked
- International revenue breakdown is from the actual annual report — not estimated
- All three exposure dimensions are addressed with evidence
- Currency risk direction is specific — not just 'FX risk exists'
Common mistakes
- Limiting analysis to transaction exposure while ignoring translation and economic exposure
- Failing to specify the direction of risk — a company with majority USD revenue has different exposures than one with majority EUR revenue
Resources
What a verifier looks for
- Challenge the economic exposure analysis: 'You identified translation exposure from the EUR/USD rate — but what about economic exposure? If the EUR weakens significantly against the USD, how does that affect the competitive position of the company's European operations relative to US-domiciled competitors?'
Analyse Hedging Strategies and Produce a Risk Management Recommendation
2–3 weeks
For the two or three primary FX exposures identified in milestone 1, analyse the available hedging instruments (forward contracts, currency options, cross-currency swaps, natural hedging) and produce a risk management recommendation specifying which instruments to use, at what hedge ratios, and for which time horizons.
Proof required
Submit an FX risk management analysis (minimum 1,500 words) covering: (a) the cost-benefit analysis of at least two hedging instruments for each primary exposure, (b) your recommended hedging strategy with specific instruments, hedge ratios, and tenor, (c) the basis risk analysis for the recommended strategy (scenarios where the hedge underperforms), and (d) the accounting treatment implications of the recommended instruments (hedge accounting vs. mark-to-market).
What gets checked
- Hedge ratio recommendation is specific — 50% hedge ratio with 6-month forwards is a recommendation; 'we should hedge our exposure' is not
- Basis risk analysis addresses the gap between the hedging instrument and the actual exposure
- Accounting treatment implications are stated
Common mistakes
- Recommending full (100%) hedging without analysing the opportunity cost of giving up favourable exchange rate movements
- Ignoring natural hedging — matching currency revenues and costs in the same currency is often cheaper than derivatives
Resources
What a verifier looks for
- Challenge the hedge ratio: 'You recommended a 75% hedge ratio — what's the basis for that specific ratio? Walk me through how the company's board would decide whether 50% or 100% would be more appropriate.'
Present FX Risk Analysis to a Treasury or Corporate Finance Professional
1 week
Present the FX risk analysis and hedging recommendation to a corporate treasury professional, CFO, or finance academic with international finance expertise who will challenge at least two of your hedging strategy choices.
Proof required
Submit: (a) Q&A log from the review session (minimum 300 words with at least two challenges and responses), and (b) attendance record with reviewer name and credentials.
What gets checked
- Reviewer has treasury or international finance expertise
- Q&A log shows challenges to hedging strategy choices or basis risk assessments
- Responses address challenges with analytical depth
Common mistakes
- Review with someone who has general finance knowledge but not FX-specific experience
- Challenges deflected with 'it depends on the company's risk appetite' without explaining how the analysis informs that decision
What a verifier looks for
- Your most useful challenge: 'Your analysis assumes the company will use hedge accounting — but if they don't qualify for hedge accounting under IFRS 9, how does the P&L volatility from the derivatives affect their reported results, and would you still make the same recommendation?'
- Provide written confirmation (minimum 150 words) of your treasury or international finance credentials and the challenges raised.
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