by Stephen McPhie, CA
Partner, RSD Solutions Inc.
Personally I am short Sterling and long U.S. and Canadian dollars. Therefore I am intimately, sometimes painfully and always nervously acquainted with the recent volatility of currency exchange rates. I wake up in mornings wondering if next week’s credit card bill or next month’s property tax can get paid.
Against the U.S. dollar Sterling is way off where it was a couple of years ago but still significantly higher than 8 years ago. The strength of the Loonie (Canadian dollar) is a blessing that I currently enjoy. However, whenever news like the latest inflation figures come out (not good) or Gaddafi kills civilians, I either take a deep breath or heave a sigh of relief.
So far I have kept out of the local mission but my concerns are a microcosm of those that all treasurers should be familiar with, whether it is currency volatility or related to commodity prices, interest rates or any other such variable.
I feel comfortable when I manage or hedge my position in some way. This might be converting in advance of my needs when rates are favourable or incurring an expense in dollars or gaining some income in sterling. This is short term. In the longer term, I might take the option I have to move back to North America!
I do know that I am aware of my position and risks and am doing just about everything I can and that I am constantly reassessing and looking for better ways to do things. I am also often seeking other views and ideas.
The question every financial executive and treasurer should be asking themselves is do they have the same satisfaction that they know their risk exposures and are managing them the best they can?
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