You have business insurance, fire insurance, vehicle insurance, indemnity insurance… Why should you treat your import/export profits any differently? With hedging, you minimise your risk against foreign exchange fluctuations by securing a currency exchange rate now for a future value date. This allows you to cost your products in today’s market at today’s rates for a future delivery. Essentially, you insure your profit.
Wouldn’t I Lose If The Rand Strengthens?
The short answer is, no, you will not lose anything. The very nature of the foreign exchange means that you take your chances with every transaction and while it is true that you would have seen better profits if the Rand had strengthened, you could also have seen the Rand weaken. Hedging works because you are still costing the profits of your products at the rate of the day conversion will take place. If the Rand strengthens, you will only lose out on additional profits but the profits that you calculated are still in place. In fact, if the Rand weakened instead, you would definitely lose the profits you calculated.
What Types Of Hedging Are Available?
Every business has unique needs and for this reason, we look at the outcomes that you require and advise a solution accordingly. At Gapex, we do:
- Foreign Exchange Contracts;
- Futures Contracts;
- Options and Derivatives.
Is Hedging For Every Type Of Business?
The short answer is again no, since every business has unique needs and outcomes, hedging might not be worth your while. It is not a one-size-fits-all. This is why we will need to talk first, so use the form on our Contact Us page to get in touch.