Currency Risk

If your company has operations, sales, or production in different countries, hedging is a necessity. With the recent rise of the U.S. dollar, some companies have become complacent about hedging. While U.S. companies can benefit from a rise in the dollar, it is difficult to predict future exchange rate movements. Hedging should be an ongoing process, even if the company feels exchange rate moves might be favorable. As the article notes, the business of most companies is not to take currency risk, but rather buy or sell a product. Unfortunately, some CFOs try to use currency markets to generate additional revenue. And while this may sound appealing, as with any investment, it is very hard to beat the currency market.