Download Foreign Exchange Hedge Aust Procedures

Monash University Procedure
Procedure Title
Foreign Exchange Hedging Procedure
Parent Policy
Foreign Exchange Policy
Date Effective
16-February-2016
Review Date
16-February-2019
Procedure Owner
Executive Director, Corporate Finance
Category
Operational Procedure
Version Number
1.0
Content Enquiries
Treasury Finance
Scope
All campuses except Malaysia
All staff
All controlled entities
Purpose
To effectively manage the foreign exchange exposures of the University.
PROCEDURE STATEMENT
The University uses hedging where deemed appropriate to remove the risk of an adverse exchange rate
movement by locking in rates. Corporate Finance (Treasury) provide this service for large transactions
denominated in foreign currency.
1.
Hedging Framework
1.1
All hedging arrangements are negotiated and put in place by Corporate Finance Treasury as outlined
in the Hedging Process section below.
1.2
Any immediate purchase of currency or forward rate contract must be denominated in EUR, USD or
GBP, the major currencies for which Monash University holds bank accounts.
1.3
The transaction has a value of at least AUD$200,000 equivalent, although special cases from a
minimum of AUD$100,000 will be considered with significant and strong arguments.
1.4
For purchases over AUD$200,000, Strategic Procurement need to be made aware of the intention to
purchase. Select Strategic Procurement for further information.
1.5
Payment transactions must have a purchase order approved within the financial delegations, or the
Faculty Dean makes a request in writing to the Senior Vice President and Chief Financial Officer.
1.6
It is strongly encouraged to negotiate contracts for income streams in AUD, but where income
transactions are negotiated and invoiced in foreign currency, a forward contract may be negotiated
through Treasury where circumstances warrant such a hedging arrangement.
Responsibility
Requesting faculty/portfolio
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Monash University Procedure
2.
2.1
Hedging Process
Contact Treasury to discuss the details of the proposed foreign exchange transaction. Information
requirements are:
a) The Foreign Currency Purchase Request Form must be completed
b) The expected payment date(s) must be provided
c) The relevant cost centre and fund must be provided
d) There must be sufficient money in the fund to finance the foreign currency
2.2
Currency advice/ rates will be provided with supporting information from at least one major Australian
trading bank
2.3
In the unusual case where an Australian agent is involved in the overseas transaction, GST may be
applicable and may need to be included in the amount that is hedged. All intricacies of the
transaction need to be identified.
2.4
Upon approval by faculty/ portfolio, Treasury will enter a transaction with a major Australian trading
bank to lock in the exchange rate until the future date(s) specified. If a payment transaction is
expected to occur within 6 months, Treasury will physically purchase and hold the currency to lock in
the rate. If greater than 6 months, a forward contract will be used.
2.5
Confirmation of rates and payment terms will be provided to the requester.
2.6
When a payment is to be made from hedged funds, this needs to be clearly indicated on the approved
invoice that is sent through to Accounts Payable via the following email address [email protected]
2.7
Where hedged funds are not fully spent within 12 months from the date of purchase, any additional
costs/ losses incurred in selling the unused foreign currency (such as an adverse movement in the
exchange rate) may be charged to the faculty/portfolio.
Responsibility
Requesting faculty/ portfolio (2.1, 2.3, 2.6, 2.7)
Funds Manager, Treasury (2.2, 2.4, 2.5)
Responsibility for
implementation
Funds Manager, Treasury
Status
Revised
Approval Body
Name: Chief Operating Officer and Senior Vice-President (Administration)
Executive Director, Corporate Finance
Date: 16-February-2016
Author: Executive Director, Corporate Finance
Definitions
Denominated: To express in terms of a given monetary unit.
Foreign Exchange: Payments and receipts denominated in a foreign
currency.
Forward Rate Contract: A contractual arrangement which locks in the
payment or delivery of a foreign exchange amount at an agreed rate and
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Monash University Procedure
date in the future.
Hedging: A risk management strategy used to limit the risk of an adverse
exchange rate movement. This can be achieved through the use of forward
rate contracts to protect either the cost of a foreign exchange payment or the
income to be received from a forward exchange receipt.
Legislation Mandating
Compliance
Related Policies
Bank Accounts Policy
Related Documents
Foreign Exchange Hedging Procedures
SCHEDULE(S)
Additional mandatory requirements specific to a Faculty or Offshore location Education procedure
This field will only be published if required.
Name of Faculty/Offshore
Location
Procedure Statement
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