Foreign Exchange Risk Management

By managing the risk, you could maximise profits or minimise the risk.

Why manage your foreign exchange risk?

  • Changes in exchange rates induce changes in the value of a firm’s assets, liabilities and cash flows, especially when these are denominated in a foreign currency.

  • Therefore, fluctuations in the currency markets have an impact on your outgoing import payments and incoming export funds.

  • Your foreign exchange risk is influenced by many factors such as length of exposure and currency volatility.

  • By managing the risk, you could maximise profits or minimise the risk.

Where do these foreign exchange exposures come from?

  • Trade – Drawdown and Repayment of Import/Export Foreign Currency Loans and payments of Import/Export Bills denominated in foreign currencies

  • Inward and Outward Remittances denominated in foreign currencies

  • Overseas Dividends, e.g. repatriating overseas profit home and Overseas Operating Expenses, e.g. paying overseas employees’ salary expenses

  • Overseas Assets, e.g. surplus cash balances of overseas subsidiaries and Overseas Liabilities, e.g. foreign currency borrowing

Who should be concerned?

  • Companies repatriating Overseas Dividends and/or paying Overseas Operating Expenses

  • Importers/Exporters

  • Companies liquidating Overseas Assets and/or repaying Overseas Liabilities

How exposed is your business?

  • Estimate the total value of all your business components that are exposed to foreign exchange risk

  • Then calculate what would happen to your profitability when there are changes in the respective exchange rates.

  • Also, consider the timing of your payables and receivables and estimate the potential impact of exchange rate fluctuation on your profit and loss over such time (example 30, 60 or 90 days)

What can you do to minimise the foreign exchange risks?

Foreign Exchange - Spot FX
HSBC offers real-time cross foreign exchange rates via online banking to add flexibility to your international business operations.

Contact us

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+852 2748 8288