Hedging moves higher up the corporate agenda as volatility reshapes treasury risk

Corporate hedging is no longer a narrow treasury discussion. In a market shaped by geopolitical instability, oil price uncertainty, currency volatility and shifting interest rate expectations, it has become a strategic business conversation.

This was the central theme at a recent TreasuryONE breakfast discussion in association with ACTSA and moderated by Peter Rattey, where treasury, economics, corporate finance and accounting specialists unpacked why hedging matters, how different companies approach it, and why risk management decisions should be reviewed against the realities of today’s market.

The panel featured George Glynos of ETM Analytics, Wilfred Skhosana of Thungela, Riaan Davel of DRDGOLD, and Kevin Hoff of BDO Inc. Together, they brought a range of perspectives across macroeconomics, corporate treasury, export exposure, financial leadership and hedge accounting.

Glynos opened the session by setting the macroeconomic context. His message was clear: no one has a crystal ball, but companies can still identify the major forces shaping risk and prepare accordingly.

One of the most immediate concerns highlighted was the impact of geopolitical tension on global oil markets, shipping routes and supply chains. The Strait of Hormuz, a critical passage for global energy trade, was discussed as a key pressure point. Reduced shipping activity, rising logistics costs, delays in tanker movements and the drawdown of strategic reserves all point to a market where operational disruption can quickly translate into higher input costs.

For South African companies, the implications are direct. Oil price movements, diesel and petrol costs, the rand-dollar exchange rate and local inflation all feed into the corporate cost base. Even where a company is not directly exposed to oil markets, the secondary effects can be felt through transport, logistics, imported goods, supplier pricing and working capital pressure.

Glynos also pointed to the broader global financial backdrop. While central banks have started cutting rates in some markets, bond yields have not necessarily followed. Fiscal risks, tight liquidity conditions and inflationary pressures continue to influence the cost of capital. This creates a more complex environment for South African businesses that must manage currency, interest rate and commodity-linked exposures at the same time.

The discussion then moved from macro context to practical treasury decision-making. Skhosana shared the perspective of an active hedger with significant foreign revenue exposure. The discussion included the role of policy, instruments and disciplined decision-making in managing export revenue risk.

In contrast, Davel brought the perspective of a company that does not hedge revenues or input costs. This created an important comparison: two businesses may operate in similar sectors, yet arrive at different hedging decisions based on their business model, balance sheet, shareholder expectations, risk appetite and view of market exposure.

This was a useful reminder that hedging is not a one-size-fits-all solution. The question is not simply whether a company should hedge, but what risk it is trying to manage, what outcome it is trying to protect, and whether its policy remains fit for purpose in the current environment.

Another important part of the discussion was the role of hedge accounting. Hoff addressed one of the challenges many companies face when implementing hedging strategies: the accounting treatment of financial instruments.

The session acknowledged that accounting complexity can sometimes influence risk management decisions. In some cases, businesses may avoid using the most appropriate hedging instrument because of uncertainty around accounting treatment. The danger is that an accounting concern can end up driving an economic decision, potentially leaving the business exposed to greater risk.

However, the discussion also pointed to an evolution in accounting rules and their application. As hedge accounting becomes better understood, companies have an opportunity to align financial reporting requirements more closely with commercial risk management objectives.

For TreasuryONE, the session reinforced a core message: in volatile markets, companies need a consistent, considered and well-documented approach to hedging. Forecasting the future with certainty is not possible, but corporates can still make informed decisions about the risks they are willing to carry and the risks they need to manage.

A strong hedging policy should not be static. It should be reviewed regularly, challenged against market conditions, and tested against the company’s operational realities. It should also be practical enough to guide decision-making when markets move quickly.

The discussion ultimately positioned hedging as a governance issue, not just a treasury tool. In the current environment, boards and finance teams need to understand how currency movements, commodity prices, interest rates and supply chain disruptions could affect margins, cash flow, debt servicing and strategic planning.

The key takeaway was simple: volatility is not going away. Businesses that wait for certainty before reviewing their hedging approach may find themselves reacting too late. A disciplined treasury strategy gives companies the ability to manage uncertainty more effectively, protect the business where appropriate, and make decisions with greater confidence.