How Are My Hedges?
Spikes in commodity prices, tariffs have companies doing a little hedge reflection.
Commodities have awakened in the last year. The price of Brent crude oil jumped more than 70% between June 2017 and June of this year while the price of aluminum climbed from under $1,500 a ton in early 2016 to more than $2,400 a ton in April—about a 60% jump—before falling to around $2,100 by mid-August. Then there’s the 10% tariff on aluminum imports imposed by the Trump administration.
The significantly higher costs for some commodities present big challenges for many companies, especially those in competitive, thin-margin industries such beverages, and they are no doubt prompting some to reevaluate their hedging strategies.
Bryant Lee, a director on Chatham Financial’s risk-management team, said his firm saw a jump in corporate clients seeking to review their hedging strategies in 2018, as prices keep creeping up and as FASB finalizes guidance for new hedge accounting rules that go into effect at the start of 2019. The Trump administration’s trade policy and overall approach to global politics have provided further prompting. Read more here.
Also this week, a look at what expectations are for faster payments. Innovations in making payments quicker abound today but implementing them fully will take time, in large part due to the significant changes corporates must make to their legacy technology infrastructures. But the expectation – and demand – for faster payments is strong, according to a survey from NACHA, the Electronic Payments Association.
TD Bank recently released the results of its annual commercial payments survey of mainly corporate executives, which it conducted at the NACHA Payments Conference earlier this year in San Diego. Integration of immediate payment capabilities captured first place, at 42%, as the technological innovation expected to positively impact the payments industry the most in the next three to five years. Artificial intelligence and machine learning took 20%, while 14% voted for mobile applications, 11% for blockchain technology, 9% for fraud and cybersecurity software, and 4% for biometics, or making payments via means including voice, face-scanning, and fingerprinting. Read more here.
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