Are you sure you don’t have FX exposures?

 

*/By Stephen McPhie, CA
Partner, RSD Solutions Inc./*

/(Repost of blog from May 15, 2012)/

So your company operates only domestically and you are satisfied that all
purchases and sales are in 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 your 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?