BSI method: refers to the risk management method that relevant economic entities try to eliminate foreign exchange risks through borrowing, spot foreign exchange trading and investment.

For example, Company C in Germany has an account receivable of100,000 USD after 90 days. In order to prevent the loss caused by the depreciation of the US dollar in future foreign exchange collection, the company borrowed100,000 US dollars from the bank for a period of 90 days.

We assume that the spot exchange rate in the foreign exchange market is USD1= DML.6870 ÷1.6880. After the company borrowed money, it converted US dollars into local currency DMl6 870 in the foreign exchange market, and then invested the acquired marks for 90 days. After 90 days, Company C repaid the bank loan with the recovered accounts receivable100,000 USD.

When signing a trade contract, Company C eliminated the foreign exchange risk through the comprehensive application of borrowing, spot foreign exchange trading and investment. After 90 days, the account receivable100,000 USD was recovered, which was just used to repay the bank loan (the interest factor was not considered in the above operation).

After signing a trade contract, the importer borrows a corresponding amount of local currency, buys the currency at the time of settlement, and then uses the foreign currency to make short-term investments in the international financial market for a corresponding period of time. When the payment period expires, the importer recovers the foreign currency investment and pays the payment to the exporter. Of course, if the income of the importer's foreign currency investment is lower than the interest cost of the local currency loan, the importer will pay the price of risk prevention, but the amount of this price is extremely limited. In this method, the enterprise converts the borrowed local currency into foreign currency, thus eliminating the value risk; The investment of foreign currency accounts payable in the future has changed the time structure of foreign exchange risk.

For example, if German company E uses BSI to avoid risks, it can borrow the corresponding local currency from the bank. If the spot foreign exchange market exchange rate is USD1= DML.6310 ÷1.6340, you can borrow Deutsche Mark 8 1.700 (DML.6340 ÷ USD 1×5.

The principle of BSI method to exclude foreign exchange payables and receivables is the same, but the order of currency operation is different. The former borrows in local currency, while the latter borrows in foreign currency; The former invests in foreign currency, while the latter invests in local currency. As can be seen from Figure 2, the BSI method completely offsets the inflow and outflow of foreign currency and eliminates the foreign exchange risk!