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1. Identify the objectives of the foreign exchange management. The objectives can be explicit (to protect a country in the case of speculative attack on the national currency) or implicit (to buy foreign currencies to keep the exchange rate low to stimulate exports). The objectives are often made clear by the supervising body or the central bank.
2. Work out the foreign exchange reserves management strategy. The strategy should answer the question of how to achieve the necessary objectives. When designing strategy, the central bank should consider the instruments and means it has to achieve its goals. For example, it needs to determine the amount of cash and other financial resources made available to it by the government.The strategy should also include what the composition of the foreign reserves should be and what currency holdings need to be decreased and increased over what period.
3. Carry out the strategy of foreign exchange reserves management. The central bank or other monetary institutions should work coherently to execute the strategy of managing FX reserves. If unforeseen developments arise, the strategy needs to be quickly adjusted and all necessary steps taken to ensure stability of the national currency and the banking system, as well as achieve any other objectives that the Forex reserves management strategy aims to achieve.