Most companies wish to limit currency risk and are risk-averse; how that happens varies from company to company and depends on the business. We have identified three common ways in which companies work today.
"Monetor has helped us structure our approach to currencies. We have a live overview of our exposure, and we can now act immediately, saving us both time and money. Our board has been delighted with the Monetor offering "
"Monetor's solution is a perfect fit for Heidenreich. With a minimum of investment, we quickly put in place a solution where we saved both time and money after a short period of operation” - Marleen Skånvik Størseth, CFO "
"Monetor's tool for currency monitoring is a perfect fit for our operation and saves us significant amounts on our trade with foreign countries."
Oddvar Deilkås, CEO
Many companies purchase at a set date each month to cover currency-related expenses by topping up a currency account. Room for upside. Liquidity is not tied up.
Problem:
The timing of the purchase happens at random, relative to the market, and there is no risk reduction. Covid19 in march 2020 is a perfect example of this where volatility was extreme.
Product solution:
Integrate ERP into your Monetor to pick up exposures. Our Micro strategies will take care of your monthly exposure by tracking baskets of exposure.
Benefits:
• Predetermined best/worst-case scenario
• Free time
• Delegate when you are away
• No more rate watching
Some companies purchase forwards in batches to cover their future risk, usually based on purchase history and estimated growth forecasts. Say a company could purchase six forwards, one for each month, twice a year, which means that the exchange rate for the upcoming period would be fixed and predictable. If the market moves in a negative direction for your business, you are covered.
Problem:
If the market moves in a positive direction, you risk losing out on a potential upside, and competition can outcompete you on prices, for instance. Hedging, tie up liquidity, be aware of "forward points" (interest rate differentials).
Product solution:
Monetor tracks your forward exposure and helps you time the execution. Upload six months of exposure and purchase at predetermined levels that match your risk setup
Benefits:
• Reduction in "forward points."
• Best case worst case up front
• Free up liquidity
• Upside opportunity
• Free up time watching the rate
• Setting target rates in best and worst-case scenarios
Some companies purchase a percentage (%) of estimated future exposure; forwards in batches to partake of a possible upside whilst limiting risk. Typically, based on forecasts consisting of purchase history and calculated growth. If the market moves in a negative direction for your business, you are somewhat covered. You can, however, achieve upside on the spot market. For instance, a company could hedge 50% of six months exposure twice (2) a year whilst purchasing the remainder at the spot.
Problem:
If the market moves negatively, your 50% is at risk and vice versa.
Product solution:
Monetor tracks your spot and forward exposure to help you time the execution. integrate with your ERP system to continually Monetor your accounts and upload your upcoming forward exposure to keep track of the markets.
Benefits:
• Reduction in "forward points."
• Predetermined levels
• Free up liquidity
• Upside opportunity
• Free up time watching the rate
• Setting target rates in best and worst-case scenarios
• Notify only the right people for the correct type of purchase within the organisation
• Currency procurement makes use of improving markets, and protects against adverse markets
