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.
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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.