Balancing Digital Aspirations While Addressing Risk Management Fundamentals: Observations From Citi Treasury Diagnostics

27 FX RISK MANAGEMENT: OBJECTIVES Risk Management Objectives 62% To reduce risk to both cash flows and earnings To reduce risk to translated FX earnings in consolidation To reduce risk to transactional cash flows 10% 38% 52% Types of Risks Hedged 55% Forecasted FX- denominated exposures Earnings translation 64% 23% 12% Net monetary FX-denominated assets and liabilities Contingent risks, including bid-to-award risks or M&A 13% Net investment in foreign operations “ We acknowledge that FX has a significant impact on our global earnings and KPI’s but do not hedge. A policy review is scheduled for this year.” — European Treasurer While 62% of companies reported reducing earnings volatility as a key risk management objective, the number of companies that actually directly hedge earnings translation exposures is quite low (12%).