An importer is a company based in one country and receives goods/services from another. Often the goods/services are paid in a different currency to the base currency of the importer. 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 importers will adopt a “no hedging” approach; perhaps FX costs can be passed on to the consumer or competitors do not hedge. Some importers will hedge on a shipment by shipment basis so the landed cost of goods is known. Some importers will manage FX on a forecast exposure basis to achieve a stable cost of goods over time.
The most common financial instruments used by importers are FX forwards and FX options.
How Hedgebook helps:
Hedgebook provides total visibility of the importer’s hedging position. By capturing cashflows, hedging and market exchange rates, importers 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.