A new way of approaching FX risk
For most businesses, foreign exchange (FX) is an unwanted by-product of doing business overseas. At best it’s an ongoing concern; at worst it can seriously impact a company’s profitability and even viability.
Most companies manage FX risk in some fashion. However, few have the knowledge, expertise or time to create and manage a strategy that is effective and measurable.
Synops is an online risk management tool that can remove FX risk for businesses. It reduces the effects of market volatility, protecting companies from the unknown. The strategies are provided in an easy to use platform, freeing businesses to concentrate on core areas of their business.
The graph below illustrates how Synops layered hedging programmes can condense market range by up to 75%.
How Synops works
Synops takes a company’s foreign currency requirements in the form of a monthly forecast, and automatically generates trading plans that neutralise the risk that FX poses to the business.
The trading plans are generated by a series of tried and tested algorithms that are proven to reduce risk. Rather than relying on assumptions, instinct or emotion, Synops is based on mathematics and science. It works the same way every time, month in, month out.
The strategies employed here are not new. Historically they’ve only been used by large multinational companies, such as those trading on the FTSE 100. Because of the mathematical complexity and the specialist knowledge required, companies generally have either not heard of them or consider them too complex to implement. This has meant that, up until now, there are not many alternatives to the standard approach to hedging.
Synops reduces the variance of the FX price, which equates to a lower buffer is needed to protect margins. This results in more accurately costed goods and services, releasing full sales potential.
Synops provides scientific measurement and transparency, capturing all of your FX trading and benchmarking your currency hedging performance and forecasts against the market.
Improved cash flow:
Synops-generated trades avoid the peaks and troughs of FX, meaning a company can accurately predict the cost of their international trade. This allows a company to allocate cash to more efficiently
Trying to predict future FX movements can be a headache and a full time job. Synops programmes run automatically, providing a management team with stability and confidence in their FX hedging.
The Synops platform
The team at Synops follow a holistic approach to the design and development of our product. We are focussed on a user centered design approach and are currently running a pilot on our Beta product to define how we can best enhance the product to suit the needs of our users. At present – we are operational in the following areas:
Balance sheet hedging:
FX remeasurement is more than just an accounting entry, it directly impacts a company’s profitability and valuation. For companies with longer cash cycles and smaller margins, the effect of remeasurement can skew reported earnings and completely wipe out a months profit. Balance Sheet hedging can offset remeasurement by up to 80%.
The platform has a forecast management module, providing customers with a single location to manage and plan their FX. It gives full visibility of current status, hedge accuracy, plus insight into what’s ahead. It empowers customers to make fully informed hedging decisions and collaborate more effectively with their broker.
Cash flow hedging:
This product uses business forecasts to drive hedging intelligently. Synop’s S-Programmes automate the placement of multiple ‘layered’ forward trades, resulting in a stable and predictable FX rate..
Synops records all trade activity – both through Synop's programmes and ad-hoc trading – and allows companies to benchmark their effectiveness against the market, in an easy to use visually led interface.
Sometimes, your particular FX situation isn’t covered by a standard offering. Synops now offer consultation to help you and your business navigate the complex world of FX management and define the right strategy for you.
Synops can help you with:
~ Setting corporate-wide FX Risk management policy
~ Defining an auditable FX risk framework, objectives, metrics and processes
~ Help in understanding special hedge accounting, and hedge effectiveness measures
Some of our specialist areas are:
~ Cross border transactions with contingent risk prior to close
~ Investment M&A FX risk, across the full cycle
~ Maximising functional currency IRR during investment lifetime
~ Contingent hedging alternatives, including deferred premium or compound options, deal-contingent forwards and swaps
Paul Stafford; Chief Engineer, has written a range of white papers on FX that shed additional light on typical FX problems companies encounter, and how Synops works towards solving them. You can view the articles here.
Whatever your need, Synops can help you manage your risk; whether it’s plain vanilla import/export, or a large, one-off deal. Get in touch with us now to discuss your situation and requirements.
Rob Groves: CEO, Co-Founder
Rob started working life in the Royal Air Force then came to the City to work in foreign exchange, where he’s remained for the rest of his career. He founded foreign exchange brokerage Infinity International, growing it across Europe. Rob looks after Synop’s strategy and sales. In his spare time he enjoys ice climbing, hoping to climb Lhotse in 2017.
Simon Grant: UX, Co-Founder
Simon is a user experience (UX) designer and architect who has spent his career working on user-centered digital products. His job is to ensure Synops is intuitive and user friendly. Simon’s research and design portfolio includes Google, Adidas, Tesco Mobile, Kellogs and Toyota. He is a follower of Zen in his spare time.
Paul Stafford: COO, Co-Founder
Paul is an ex-NASA rocket scientist and HP instrumentation engineer who ended up in foreign exchange risk management by virtue of his engineering / maths background. Paul runs engineering and hedging algorithm development. His favourite quote is “Slow is smooth, smooth is fast”.
Gerard Melia: Product Manager
Gerard has a wealth of experience in managing financial projects and products. Having worked directly on trading platforms and financial software at companies like IG and CMC Markets, his industry and delivery experience helps bring Synops to the market.
As of January 2016 Synops is fully operational. If you are interested in becoming a pilot broker, customer or would like to stay informed of our progress please email us here. We promise not spam you or sell your data.