Managing in the face of exchange-rate uncertainty
09 Jun 2006
Deloitte Research has published a new study (PDF 167k).
This report examines the risk exposures of large and long-term shifts in currency values to future business cash flow, especially changes to the US dollar vs Asian currencies. The report identifies operational hedging as a means for companies to create flexibility in their operating models. In contrast to financial hedging, operational hedging provides companies a broader range of options to manage long-term exchange rate risks and sustain future cash flows.
Operational hedging is a strategy designed to manage risks through operational means. It provides companies with flexibility in their supply chains, financial positions, distribution patterns and market-facing activities by allowing dynamic adjustments in the locations used to manufacture, source, and sell. When deployed carefully, such flexibility can help to reduce the impact of large and long-term shifts in currency values on costs and revenues. |