Foreign Currency Hedging White Paper

Free White Paper: Minimize Your Currency Risk When Importing

A good hedging strategy will trim away unnecessary risks. Time to get the clippers.

Don´t let your company´s success depend on the strength or weakness of foreign economies or exchange rates: find out how to manage your company´s currency risk.

Protect your company´s bottom line: a changing economy doesn´t have to impact your profits.

• Clear up the top 3 myths associated with currency hedging
• Learn how to identify and mitigate your company´s FX risks
• Discover the key elements for a successful FX risk management strategy
• Protect your company from changes in an uncertain economy

Ensure that the success of your business depends on its operations and not unpredictable economic factors and volatile currency rates. Hedge your currency risks—learn how.

White Paper Excerpt

Foreign Exchange Risk Management: Protect your Profits and Prosper in an Uncertain Economy

Over the past few decades the growth and complexity of international business, multinational operations and import and export has increased at a staggering rate.  As the economies of many different countries become more entwined, the economic stability and prosperity of the countries that you do business with becomes more important.  This, coupled with the dramatic currency fluctuations that have taken place in developed and emerging economies, demonstrates the need to be aware of the factors influencing your business operations and the need to take an active role in protecting, stabilizing and potentially increasing your currency assets.

Dealing with multiple currencies, foreign suppliers, imported goods or overseas operations exposes you to foreign currency risk.  The key to surviving and thriving amidst ever-changing market conditions and currency fluctuations is to hedge these foreign currency risks that affect your business.

A 2006 survey conducted by a large North American foreign exchange provider found that 80% of the corporations surveyed acknowledged that their businesses were exposed to significant foreign exchange risk.  However, only 42% of these corporations indicated that they currently employ currency hedging techniques to manage their risk.

The objective of currency hedging is not to maximize profits through currency speculation but rather to minimize the risk that your company is exposed to.  A hedging strategy is essentially an insurance policy against the adverse effects of currency fluctuations and economic conditions that are out of your control.  In the same way you would insure your business from fire or theft, hedging insures your company's currency assets from unforeseen changes in the global foreign exchange market.

Even if you believe you are not exposed to currencies outside of your domestic currency, it's likely that you are.  Companies that don't directly deal in foreign currency may be inadvertently affected by suppliers that deal in foreign markets.  For example, you are exposed to Chinese economic conditions when you purchase from a supplier that imports from China, because your supplier will pass changes in currency on to you. The Chinese economy has seen dramatic growth over the past decade, forcing the yuan to continually appreciate against the US dollar. As a result, the US dollar's purchasing power continually diminished.