An exporter is a company based in one country and selling goods/services to another. Often payments for the goods/services are received in a different currency to the base currency of the exporter. As such an FX exposure is created and profits are impacted by the fluctuations of exchange rates.
There are a number of risk management approaches used to manage the impact of foreign exchange movements. Some exporters will adopt a “no hedging” approach; perhaps the cost of producing the good/service is correlated with FX rates so the negative impact of FX on cost of goods sold is offset by higher sales proceeds. Some exporters will hedge on a shipment by shipment basis so the margin is locked in. Some exporters will manage FX on a forecast exposure basis to achieve stable receipts in local currency terms.
The most common financial instruments used by exporters are FX forwards and FX options.
How Hedgebook helps:
Hedgebook provides total visibility of the exporter’s hedging position. By capturing cashflows, hedging and market exchange rates, exporters can understand their position and the impacts fluctuating exchange rates can have on profits.
Download our introductory eBook for Importers and Exporters on how to better manage FX Risk. Understand what constitutes FX risk, whether you should be hedging against it, the common financial instruments involved and the technology tools available to make the process easier and more secure.