Facing the risks of currency volatility head on
Manufacturers can use operational hedging to mitigate exchange rate risks
Canadian manufacturers have relied heavily on strong exports to the United States to bolster sales and profitability. As a result, the fluctuating U.S. dollar has taken a significant toll on many manufacturers. Gone are the days when companies can depend on relatively open U.S. borders and favourable exchange rates to ensure steady sales. Companies that fail to adjust to new market realities, including the need to expand markets, diversify their product mix and build a strategy to address increased volatility, are likely to fail. It’s as simple as that.
Currency volatility is not a new phenomenon in the global economic landscape. Ample strategies exist to guide organizations through the current tumultuous times. Some of these strategies are set out in Managing in the face of exchange rate volatility , a global Deloitte Research report that makes the case for operational hedging to match supply and demand.
By dynamically adjusting the locations used to manufacture, source and sell, operational hedging gives companies flexibility in their supply chains, financial positions, distribution patterns and market-facing activities. When deployed carefully, it can also help reduce the impact of long-term currency fluctuations.
This report is a must-read for manufacturers interested in adopting innovative strategies to mitigate exchange rate risk and enhance their competitiveness.
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