Foreign exchange risk management strategy
Foreign exchange risk management
Atlas of foreign exchange risk management
(A) a complete compensation strategy
That is, take various measures to eliminate foreign exchange exposure and fix expected income or fixed cost in order to achieve the purpose of hedging. For banks or enterprises, it is to make up all the foreign exchange positions held. Generally speaking, it is safe to adopt this strategy, especially in the case of weak strength, lack of foreign experience, insensitive market information and large exchange rate fluctuations.
(B) partial compensation strategy
That is, measures should be taken to remove part of the exposure amount, keep part of the insured amount, try to leave some opportunities for making money, and of course leave some possibilities for losing money.
(c) There is no compensation strategy at all
That is, the amount of foreign exchange exposure is allowed to bear foreign exchange risks, which is suitable for situations with small exchange rate fluctuations and small foreign exchange business scale. Faced with low-risk, high-yield and bullish foreign exchange rate, enterprises are also easy to choose this strategy.
Foreign exchange risk management process
(a) Identifying risks
Enterprises should know what foreign exchange risks exist in foreign transactions, which are trading risks, accounting risks or economic risks. Or know which foreign exchange risks are primary and which are secondary; Which currency is more risky and which currency is less risky; At the same time, we should know the duration of foreign exchange risk.
(2) Measure risks
Comprehensively analyze the obtained data and exchange rate, and calculate the risk exposure position and risk gain and loss value, so as to grasp the degree of these exchange rate risks and how much losses will be caused.
Exchange rate risk can be measured by direct risk measurement and indirect risk measurement. According to the characteristics of risk, exchange rate risk can be measured from different angles, thus providing more accurate basis for avoiding risk.
(3) Avoid risks
That is, on the basis of identification and measurement, measures are taken to control foreign exchange risks and avoid large losses. The determination of exchange rate risk avoidance scheme needs to choose specific avoidance methods under the guidance of exchange rate risk avoidance strategies of enterprises in international trade. Enterprises should combine their own nature on the basis of scientific risk identification and effective risk measurement. The scale, scope and development stage of the business and other business characteristics of the enterprise shall adopt comprehensive avoidance strategy, passive avoidance strategy or active avoidance strategy. All kinds of evasion strategies are only different in application conditions, and there is no difference between advantages and disadvantages.
On the basis of determining its hedging strategy, the enterprise further chooses its hedging method. There are two hedging methods for enterprises to choose from:
First, trade negotiations combined with business strategies to avoid exchange rate risks; The other is to use financial derivatives to avoid trading risks, mainly including: financial derivatives such as futures and options. Different methods correspond to different operations, but the purpose is to make? Uncertainty? Be determined, so as to avoid risks.
Principles of foreign exchange risk management
(a) Ensuring macroeconomic principles
When dealing with the microeconomic interests of enterprises and departments and the macro interests of the whole country, enterprises usually try to reduce or avoid foreign exchange risk losses and pass them on to banks, insurance companies and even national finance. In practical business, we should combine the interests of the two as much as possible to prevent risk loss.
(2) the precautionary principle of classification
For different types of exchange rate risk losses with different transmission mechanisms, different applicable methods should be adopted to prevent them, which can be effective, but we should avoid copying them mechanically. For the risk of transaction settlement, we should take the choice of pricing and settlement currency as the main prevention method, supplemented by other methods; For the exchange rate risk of bond investment, we should adopt various preventive methods. For the risk of foreign exchange reserves, priority should be given to diversification of reserve structure and timely replenishment of foreign exchange.
(3) the precautionary principle
From its practical application, this principle includes three aspects:
(1) makes the risk disappear;
(2) transfer risks;
(3) Avoid losses and gain benefits from risks.
Especially the last one, is the ideal goal that people pursue.