Mitigating foreign exchange risk for manufacturers
Beyond managing the globalisation of supply chains and operations, manufacturing businesses have many variables to consider, such as logistics, inventory, and production lines. Whilst they expertly manage business operations, understanding foreign markets and any risks around currency exchanges requires careful planning, monitoring, and informed adjustments to maintain business security and profitability.
As well as managing exchange rate fluctuations, manufacturing businesses must consider the best solutions based on their business needs, such as paying for components sourced overseas and supplier invoices. Other considerations when mitigating foreign exchange risk for manufacturers include the time scale for payments to be settled and securing the desired exchange rate.
Halo Financial is here to guide you through some of the most effective solutions for mitigating foreign exchange risk as a manufacturer launching goods in foreign markets.
Managing foreign exchange risk for globalised manufacturers
There are a number of ways that manufacturers can mitigate exchange rate risk associated with foreign exchange when operating in foreign markets.
Market orders
Market orders, or automated currency orders, allow you to limit your currency exchange risk by buying or selling currency at a predetermined target level, whilst also enabling you to capture exchange rates around the clock. However, you won’t be required to make payment until your order has been fulfilled. With this reassurance in place, your business can capture exchange rates more flexibly and be better protected should the exchange rate move against you.
This strategic solution suits businesses that don’t require immediate currency transfers, whilst targeting a better exchange rate and offering protection against further market fluctuations. Automated orders are ‘good til cancelled’ (GTC), meaning that they sit in the market until they are triggered, reach their expiry date, or are cancelled. As a business, this provides you with peace of mind in not needing to constantly monitor the markets as you know they’re working to achieve your target currency rate.
Automated orders are designed to protect your business against losses whilst maximising any currency gains. This solution also provides additional peace of mind with expert currency rate monitoring and the flexibility to modify or cancel your order as needed.
Forward trades
Forward trades offer your business the control to set your desired currency amount and settlement date in advance. Limiting your currency exposure in this way guarantees the amount you need to pay each time and protects your payments against currency risk.
This hedging solution offers the flexibility to plan ahead for international payments, proving particularly useful for paying different amounts on fixed installment dates. By setting an exchange rate in advance, you can secure a guaranteed currency amount regardless of any currency market fluctuations before the settlement date.
Forward trade offers an available currency exchange in the majority of freely tradable currencies and protection against moving exchange rates during your chosen time frame. With Halo Financial’s excellent client service, you can also settle the currency trade up to 12 months in the future. This is an ideal solution for managing the risk when exchange rate fluctuations and currency market movements are uncertain.
Spot contracts
Ideal for immediate currency transfers, spot contracts allow your business to make a currency exchange within a shorter time frame and even on the day. This is advantageous if you need to make a large payment at short notice or at a specific time.
With Halo Financial, your currency specialist helps to identify the best time to make your currency trade based on the current exchange rate. Your currency specialist will also monitor live spot prices to see how this reflects on your current financial situation, to effectively minimise risk.
We’re proud to offer peace of mind service that your currency specialist is monitoring the currency market and how it may affect your business, as well as notifying you of any changes to your chosen exchange rate.
Experts in mitigating foreign exchange risk for manufacturers
Halo Financial’s personalised, professional foreign exchange services are designed to help you maximise the timing, flexibility, and market knowledge that informs your currency transfers. By helping to protect your profit margins and minimise the impact of currency fluctuations on your business, you can operate globally with confidence.
Our currency specialists are committed to finding the best foreign exchange solutions for your business needs. With over 16 years of experience working with various types of manufacturers and other globally operating businesses, Halo Financial takes away the stress of developing a comprehensive risk management strategy with tailored solutions.
Whatever your concerns surrounding foreign markets, allow Halo Financial to help your business mitigate foreign exchange risk with our outstanding client services and reliable solutions. Register for a Halo account today.