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Metal Casting Technologies : March 2006
43 currency. The key is to remember that you can manage effectively the impact of the foreign exchange risk you assume. Minimum margin: by constantly monitoring the exchange rate relative to your "minimum margin rate" (i.e. the rate at which your profit margin is at its minimum tolerable level) for each deal or budget period, you ensure bottom line protection. Invoice terms: it is vital to not only synchronise the purchase or sale and delivery of currency with the terms of the invoice, but also to build in flexibility to be able to adapt to delayed shipments, early settlement discounts, etc. If you use tools such as forward contracts, you should incorporate flexible delivery windows so that you are not tied to a specific purchase or sale date. Risk-aversion: you also need to decide how averse a strategy to adopt to your foreign currency purchases. For example, adopting a policy of aggregating your future currency requirements, and covering a percentage with forward contracts, enables you to "play with" the remainder and try to coincide the final purchase or sale of currency with favourable market conditions. Companies need to balance the bottom line protection (by hedging) and the competitive environment (i.e. the possibility of rivals being able to undercut at the time of delivery due to more advantageous exchange rates). Whether your company is making payments for raw materials, purchasing equipment from an overseas vendor, or selling to offshore clients, it is critical to plan how you will deal with the exchange rate risk. Of course, assisting you with formulating your currency risk management strategy, and providing you with market information, is only part of the service you should be receiving from your foreign exchange and cross-border transactions supplier. Providers today need to offer processing and reporting efficiencies to take away the additional pain of what can be a cumbersome part of the accounting procedure, and further allow you to focus on your day-to-day business. By employing STP streamlining, and tailoring both the strategic and procedural expertise to your exact requirements, foreign payment specialists (in contrast to the "fx houses" of old) can introduce real value to today's international organisations. ● Ruesch International is a premier provider of both foreign and domestic payment solutions in the U.S and Europe, and has 30,000 clients (including 125 of the U.S. Fortune 1000) processing over $21 billion in transactions annually. The company began Australian operations in Sydney in December 2005. For more information, including regular free exchange market news, please visit www.ruesch.com. au or contact Nicholas Tubb, General Manager, 15th Floor, 99 Walker St., North Sydney, 2060, Phone (02) 9911 7799, Fax (02) 9911 7788, Nicholas.email@example.com METAL Casting Technologies March 2006