10 The Organization receives voluntary and assessed contributions and makes payments in currencies other than US dollars. It is exposed to foreign exchange currency risk arising from fluctuations in the currency exchange rates.
20 All accounting transactions are made at the rates provided by the United Nations and reproduced on the WHO Intranet site. Financial Regulations 6.7 and 6.10 outline the provisions which apply to the collection of assessed contributions.
30 In accordance with Financial Regulation 4.4, Treasury conducts foreign currency hedging operations to reduce the effect of foreign exchange fluctuations on the dollar value of the Organization's assessed contributions and Special Account for Servicing Costs (fund title AS) income. The Foreign Exchange Hedging Policy details the conduct of these operations. Foreign exchange hedging reduces or eliminates the impact of movements in foreign exchange rates on the reporting currency (US Dollar for WHO) value of foreign exchange income, expenditure, assets and liabilities, and reduces or removes currency variances in the Organization's performance against its budgeted activity levels.
40 Gains and losses on the hedging operations negate equivalent losses and gains on receipts and disbursements as compared with the exchange rates budgeted. Any hedging gains and losses are credited or debited promptly to the underlying programme income and expenditure that were hedged so as to minimize the effects of exchange rate movements versus the budgeted exchange rates for that income and expenditure.
50 The approved instruments used for foreign exchange hedging are forward foreign exchange contracts and currency options including collar strategies of purchased and written options to reduce premium cost. Foreign exchange hedging is only transacted in respect of committed exposures where the amounts involved are reasonably certain and quantifiable. For all hedging contracts competitive quotes will be obtained from at least three banks.
60 Forward foreign exchange contracts are also used to manage short-term cash flows of foreign currency balances to minimize foreign currency transaction risk.
