by Stephen McPhie, CA
Partner, RSD Solutions Inc.
So your company operates only domestically and you are satisfied that all its purchases and sales are in the domestic currency. No need then to spend any more time thinking about exchange rate volatility. Are you sure? How about your major suppliers? Or your major customers? Their currency exposures could affect you greatly.
If your supplier gets a lot of inputs from abroad, he may be forced to jack up his prices to you if the domestic currency weakens. Or if you sell inputs to a major customer who sells much of his product abroad, you are vulnerable to him passing on some or all of his currency exposures to you. And of course, if your currency strengthens, you may suddenly be hit by a flood of cheap imports competing with your products.
So are your risk systems geared up to look at the bigger picture?
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