The old assumption is that companies should reduce the number of their accounts to better manage their FX risk. Rather than merely query the number of accounts however, the more relevant question for companies in this context is how to avoid hardcoding a complex account structure altogether.
The ability to manage your entire operations from a single account could transform how you approach payments and collections, liquidity, and currency risk. A new generation of solutions makes this achievable. Today, you can design a hierarchy of virtual or sub-ledger accounts to solve for complex accounting issues. An alternative structure is to place a cluster of physical accounts in multiple currencies in a single location. No one size fits all. The right structure will depend on your operating model, business activities and transaction flows.

A flexible account structure frees you to make liquidity more efficient to manage. Solutions that embed FX in liquidity management serve the flow of business while letting you aggregate and strategically manage currency exposures.

The ability to manage your entire operations from a single account could transform how you approach payments Solutions for funding and sweeping cash let you tightly link payments, liquidity and FX for agile mobilization of cash in alignment with transaction flows. For example:

• Just-in-time funding builds on a simplified centralized account to automate local currency payments. The solution embeds FX and lets you pay directly via local ACH systems. Embedding FX within funding lets you manage currency exposures while increasing payment efficiency.

• Some companies need to retain local currency accounts. You can fund these automatically from one central account in your functional currency and convert and centralize residual balances in the same manner. This allows you to retain onshore accounts and limit the duration of currency exposures without compromising central liquidity.

Such solutions allow you to consolidate liquidity and hedge against a currency pool that can be invested in the most advantageous interest rate environment.

When you take these steps, FX becomes a connection, or bridge, between liquidity and payment flows that is embedded as part of an automated end-to-end process. Managing FX in this way removes pockets of cash in non-functional currencies where the currency exposure tied to any one position may seem small, but the aggregate exposure could be large and financially damaging. Natural hedges become possible where payments and receipts enable them.

Accounts, liquidity and FX align to support payment flows and underlying business while strategically managing currency risk. FX risk management is no longer a separate task but instead tightly integrates within the account structure.