Case Studies

Stories from the coal face

Case Study 1
Case Study 2
Case Study 3

Stanley’s Story

** all names have been altered to protect my client’s privacy

Meet Stanley, a second-generation entrepreneur whose journey in the world of currency exposures has been nothing short of a rollercoaster ride. For more than a decade, I have had the privilege of working with him, witnessing firsthand the triumphs and tribulations he has faced in the fiercely competitive industry he navigated.

Stanley’s determination to protect his business against currency fluctuations was evident from the start. To achieve this, he was sold a seemingly perfect solution by his bank in the form of a Smart Forward FX hedge product. The product promised to safeguard his benchmark rate while offering potential benefits if the AUD/USD exchange rate moved favorably. It seemed like a win-win situation at the time.

However, little did Stanley know that this decision would soon lead to a devastating setback. As the AUD/USD spot rate surged unexpectedly, he found himself buying USD at a rate much lower than anticipated, resulting in an FX loss of a staggering AUD 2,200,000. The impact of this loss was far-reaching, affecting various aspects of his business and straining his relationship with the primary bank.

Facing a tough dilemma, Stanley realized that he needed a more robust and reliable approach to managing currency risks. The first step was to break free from the limitations imposed by his primary bank. New FX counterparties were sought, and the quest for a comprehensive risk management framework began.

Gone were the days of relying solely on uncertain forecasts. Instead, we developed a strategic risk management policy that considered various critical factors. The policy outlined the percentage of hedging to be undertaken, transaction execution methods, authorized personnel, counterparty arrangements, and metrics for margin providers. It was a meticulously crafted plan, and we were determined to make it work.

We forged ahead, adding additional counterparties to diversify risk. But this move wasn’t without its challenges. As we explored margin facilities, we had to carefully assess the risks associated with cash deposits required in favourable exchange rate scenarios.

With the risk management policy in place, we harnessed the power of the Sartori Portfolio Model, a sophisticated approach that considered a suite of six products implemented to Stanley’s unique needs. My role as an advisor became even more crucial as I provided specific product recommendations and meticulously selected transactions to ensure we achieved the minimum benchmark rate for payments.

Regular meetings with Stanley and his CFO became the norm, where we continuously fine-tuned our strategies and adapted to the ever-changing business landscape. Our ultimate aim was to achieve a final payment rate between 1 and 2 cents above the benchmark rate, offering a buffer against adverse exchange rate movements.

The journey wasn’t always smooth sailing. There were years where market conditions presented formidable challenges, leading us to achieve only the benchmark rate. But these moments were mere blips in a decade-long success story. In most instances, we surpassed our goals, protecting Stanley’s business and empowering him to seize opportunities that his competitors missed.

Through it all, Stanley’s resilience and trust in the process never wavered. Together, we weathered economic storms, navigated uncertain times, and emerged stronger. Today, as we reflect on a decade of unwavering collaboration, we celebrate Stanley’s remarkable achievements, powered by a comprehensive risk management approach that transformed his business.

Stanley’s story is a testament to the power of determination, adaptability, and strategic thinking. It showcases how a second-generation entrepreneur, armed with the right tools and the guidance of a dedicated advisor, can conquer the dynamic world of currency exposures and build a legacy that stands the test of time.

“Sustainability starts with Risk Management.”

-Adrienne Sartori

Cambell’s Story

** all names have been altered to protect my client’s privacy

Introducing Campbell, a tenacious second-generation entrepreneur who fearlessly treads the treacherous waters of importing in the IT industry. Over the past seven years, I have witnessed his resilience in navigating the turbulent currency markets, where fortunes rise and fall with each unpredictable exchange rate fluctuation.

Before our collaboration, Campbell had experienced the ups and downs of traditional FX risk management products like FECs and FX collars. With significant discounts to the prevailing spot and forward rates, they also pose challenges in achieving benchmark rates, hindering Campbell’s growth ambitions. To overcome some of the pricing obstacles, Campbell had already severed ties with his relationship bank and adopted a single margin provider. However, with grand aspirations for expansion, he needed a more comprehensive approach to protect against margin calls.

Together, we crafted a bespoke Risk Management Framework tailored to Campbell’s unique needs and his rapidly evolving business landscape. The policy outlined the right percentage of hedging, strategic transaction execution methods, authorized personnel, and metrics for margin providers, reducing cash constraints from margin calls.

The Sartori Portfolio Model emerged as the perfect solution, empowering Campbell to seize opportunities and achieve remarkable results. Its suite of products not only initially provided hedge rates significantly better than prevailing spot and forward rates but also offered a chance to benefit from both favourable and unfavourable exchange rate movements. This newfound strategic edge catapulted Campbell’s success, allowing us to achieve payment rates 1 to 2 cents above the annual budget rate consistently from 2016 to 2019.

But even the most intrepid entrepreneur faces unforeseen challenges. In 2019, an international behemoth set its sights on the Australian market, wielding aggressive pricing strategies that threatened to overshadow Campbell’s accomplishments. The race was on to protect Campbell’s benchmark rate set at 0.7000 amidst a declining exchange rate landscape and further exacerbated by the unforeseen global crisis of the COVID-19 pandemic.

Yet, in the face of adversity, Campbell and I stood steadfast, devising and implementing a comprehensive strategy to safeguard the benchmark rate. Against all odds, we emerged victorious, securing the 0.7000 rate during FY 2019/20. Campbell’s market position solidified, and his resilience shone bright.

With renewed confidence and a battle-hardened spirit, we shifted our focus back to achieving payment rates above the benchmark, and Campbell’s success continued to soar. The last two years have witnessed triumph after triumph, as Campbell’s tenacity and strategic acumen turned challenges into opportunities.

Today, Campbell stands tall as a testament to the power of determination, astute risk management, and a willingness to adopt innovative strategies. His journey has been a demonstration of the rewards of embracing change, adapting to adversity, and charting a course for success amidst the turbulent seas of currency markets.

As we continue our extraordinary partnership, we are excited to witness Campbell’s unwavering commitment to excellence and the limitless potential of a second-generation entrepreneur who never shies away from daring to dream big and conquering new horizons. Campbell’s story is a beacon of inspiration to all, demonstrating that with the right guidance and a resolute spirit, success knows no bounds in the exhilarating world of currency risk management and business growth.

“In highly competitive industries, a successful currency strategy can make all the difference in increasing market share.”

-Adrienne Sartori

Michael’s Story

** all names have been altered to protect my client’s privacy

Step into the captivating world of Michael, an extraordinary CFO leading a manufacturing business in Australia with an innovative vision for financial markets. Despite facing the challenges of the Global Financial Crisis (GFC) and the volatile currency markets, Michael’s tenacity and creative thinking set the stage for a remarkable transformation.

As the GFC hit, exchange rates took a nosedive, and Michael sought refuge against further plunges. The bank offered a pricey vanilla option that fell short of Michael’s expectations. Unwilling to settle for less, Michael embarked on a quest for a better solution, and that’s when our paths crossed.

Through our collaboration, we identified a brilliant way to optimize the cost structure—requesting pricing for copper rod in USD. Although the current supplier hesitated, Michael fearlessly sought alternatives and discovered an international supplier. The decision came with challenges, including longer lead times and cashflow impacts, but the significant cost improvement made it all worthwhile. With courage and determination, Michael unlocked a world of possibilities.

With the switch to USD-denominated copper, the USD purchases skyrocketed from USD 10,000,000 to over USD 50,000,000 due to soaring copper prices at record highs of USD 10,000 per tonne. Now, we faced the thrilling task of managing both the copper price and the exchange rate risk. Together, Michael and I developed a robust risk management framework to navigate these turbulent waters.

Opting to do nothing on the copper front was a calculated move, as we anticipated opportunities to lock in more favorable rates at lower copper prices. Meanwhile, the currency was also at record levels, presenting a unique opportunity to ensure payment rates above parity and significantly enhance profitability compared to previous arrangements.

Our bespoke risk management policy came to life, with a supportive commodity trading desk from the primary relationship bank and a diverse panel of margin providers to mitigate counterparty risk. Setting benchmark rates monthly was a bold approach, requiring courage and keen judgment, but it provided us with flexibility and agility to make timely decisions in response to market movements.

Embracing the Sartori Portfolio Model, we ensured transactions were executed at rates better than prevailing spot and forward rates for both currency and copper purchases. This strategic move fortified profits against both currency and copper price fluctuations from a contract cost perspective.

As the years passed, the exchange rate and copper price found their way back to normal trading ranges, but Michael’s visionary strategies and our collaborative efforts ensured a margin of at least 1 cent above the weighted average annual budget rate for over 12 years. The manufacturing business flourished under Michael’s leadership, fuelled by a steadfast commitment to innovative risk management and a daring spirit to seek new opportunities.

The tale of Michael exemplifies a compelling business story of resilience, strategic acumen, and the power of innovative financial solutions. Together, we forged a path of prosperity amidst challenging times, proving that with a bold vision and unwavering determination, businesses can thrive and prosper against all odds.

Now we’ve got your head in the risk management game, lets talk about your business

Thank you for your upload