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January 2019 -
EncoreFx, Paul Lennox

Steve Kulchyk and Allison Gramlow of EncoreFX

Foreign Currency Risk: Protecting Your Top and Bottom Lines

by Paul Lennox

Have you ever thought about the impact of a 10% adverse move in the USDCAD exchange rate on your business? Maybe imports are a small portion of your Cost of Goods Sold (COGS) or maybe your sales are all in Canada so foreign exchange market fluctuations are of no consequence and that is one less thing for you to worry about.

But what if you do have substantial sales to the US or you rely heavily on US suppliers? Is the business well positioned to handle a 10% appreciation or depreciation in the dollar? Here are two examples, one for a typical importer and one for an exporter to illustrate sensitivity of business earnings to the exchange rate:

Example: Canadian Importer

If USD rises 10% to 1.3750 net income falls 25%:

Example: Canadian Exporter

If USD falls 10% to 1.1364 net income falls 45%

Over the past 25 years there has been 10 years when USDCAD has appreciated at least 10% and 8 years when it has fallen at least 10%. 20%+ moves are not uncommon.

Is your business protected from this type of market risk? Do you have a cost-effective, prudent foreign exchange hedging program in place to protect your top and bottom lines?

EncoreFX specializes in foreign exchange risk management for companies that do not have in-house dedicated treasury staff. We currently have over 2,700 corporate clients across Canada, New Zealand and Australia. foreign exchange risk management provides an insurance policy against the impact negative currency swings can have on cash flows and the profitability of business operations.

If you are looking for protection from an adverse move in the exchange rate but want to participate in a favorable move, you may want to consider the merits of currency options. EncoreFX has the expertise and resources to tailor and help implement prudent option strategies for qualified businesses. Talk to us. You’ll be amazed at the value we can add.

Call our local experts Allison Gramlow and Steve Kulchyk at 226-241-6669 or 1-833-307-4043.

Suite 1009, 180 Northfield Drive Unit 4, Waterloo
Phone: 226-241-6669
Mobile: 226.338.6593


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ISSN 0824-45
Copyright, 2019

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