Case Study - Biotech
A biotech company listed on the ASX was experiencing rapid sales growth in the US market but was concerned about projected forecasts missing targets due to an appreciating Australian Dollar.
Challenges
The main challenges they faced were how to be confident of hitting the targets if they were exposed to foreign exchange risk and how to manage the foreign exchange risk through a policy. The Finance team and Board did not have direct experience in developing or implementing an appropriate hedge accounting program.
Our support
Hedge Effective Advisory offered to help by providing the following services:
production of a Derivative & Hedge Accounting Policy (DHAP) for the Audit & Risk Committee to approve,
provision of managed services to run the hedge accounting program for the Finance team,
and ongoing advice and support to the business during subsequent audits.
Outcome
With our help, the hedge accounting program reduced the accounting volatility caused by their new foreign exchange risk management policy. The Finance team was also confident that their hedging activities would not distort the financial results. This allowed them to focus on their core finance objectives without getting bogged down in the details of hedge accounting.