by Michael Arbow, MBA
Partner, RSD Solutions Inc.
Recently Peter G. Hall, Vice-President and Chief Economist at the Canadian government’s Export Development Corporation stated in his weekly e-newsletter that when it comes to exporters dealing with the “soaring loonie” a survey showed that:
“(of the) current coping strategies, the largest group of respondents, at 28%, is simply riding out dollar movements. Cost-cutting is the preferred route for 20% of exporters, while 10% have a hedging strategy. At 7%, a small minority is having success passing on the cost of a higher dollar by increasing selling prices.”
So almost 50% of respondents are either effectively doing nothing or hoping that cost cutting in a commodity appreciating world will reduce the risk to their firm of feeling the pain of a strong Canadian dollar. Cost cutting can work but sadly the costs being cut are probably adversely effecting moral, staff training or future market opportunities; as for “winging it”, that to may limit future growth and profitability.
Why do so few firms go with a hedging (arguably the more sensible route for some) strategy? The common reason we at RSD have found is a misunderstanding of the strategy or the lack of internal corporate skill sets and the discomfort of senior staff acknowledging this. Is that where your firm stands? And is that really a justification for doing nothing or slashing and burning operations to effectively stand still?
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