CPABC Industry Update | Page 6

How Are You Managing Foreign Exchange Risk? Grant Thornton LLP and Food & Consumer Products of Canada Report In conjunction with Food & Consumer Products of Canada, (FCPC), Grant Thornton LLP recently conducted a survey of 55 FCPC member companies to get a better understanding of how they are managing their foreign exchange risk and related policies. With the recent rise in the US dollar, monetary exchange strategy is clearly top of mind with many companies – especially those doing significant business outside of Canada. It is our hope that direct insight into what industry peers are doing will provide forward-looking companies with a deeper perspective on critical emerging foreign exchange issues and challenges. page 6 Policies to manage foreign currency risk The fact that just over 80% of survey respondents said they do have a foreign exchange policy in place is highly encouraging. However, it’s critical for companies to review, monitor, and evaluate those policies on a regular basis to make sure they align with existing and imminent types of transactions. They need to carefully monitor changes involving international trade partners to account for country-specific risks, and also consider timelines, for example with respect to hedging strategies. Given that the overwhelming majority of companies surveyed have a foreign exchange policy, those without one should consider the matter more closely. As the economy becomes increasingly global and the US dollar rebounds, foreign exchange will have | I N D U S T R Y U P D AT E a major impact on any organization’s operations. Savvy companies will revisit their foreign exchange policy to see how they can mitigate inevitable and fast-changing risks. Factors that contribute to the increase in foreign exchange risk When asked to specify what factors are contributing to the increase in foreign exchange risks, all respondents said that “paying vendors in foreign currency ” increased risk , with “purchases of capital equipment using a foreign currency” coming in second (53%). These results underline the importance of having a formal risk strategy in place: if virtually all companies are paying vendors in foreign currency, it’s imperative that all have a foreign exchange policy in place.