Advice to help you develop new markets in other countries.
Exporting is a growth strategy that, unfortunately, many manufacturers shy away from. Dealing with foreign currencies can seem risky and mysterious. Volatility in exchange rates can wipe out the profit from a sale. There is a whole new language of options, hedges and financial instruments. And, of course, there are fees involved.
Don't let these obstacles keep you from developing new markets in other countries. Here are some tips for successfully managing foreign currencies:
Stick to Dollars
The simplest path is to price everything in dollars and leave currency exchange to your customer, or use credit cards that convert currencies for you. This will limit your growth, however, because many customers want to do business in their local currency.
Lock In Rates
A forward contract dispels uncertainty about rate changes that could affect future cash flows. It establishes a firm obligation to buy or sell a fixed amount of foreign currency on a specific future date at a predetermined exchange rate.
Hedge Your Bets and Consider Your Options
Foreign currency options are financial instruments that can allow you to benefit from favorable market moves, and they also provide some protection against losses if the market goes the other way. Here are three types of options contracts:
Get Expert Help
You can hire a foreign exchange advisor or turn to a knowledgeable banker. They can help you to manage foreign exchange risk more effectively, assure you of secure pricing and costs, and open opportunities to increase profits and reduce expenses. Furthermore, they can help you develop a foreign exchange risk management strategy for the new territory of international business.
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