RVB strives to provide a highly competitive, efficient and above all proactive service, assisting clients in preempting currency issues affecting their day-to-day business. This is in direct contrast to the reactive service whic his common in the market place.
Every situation is different. RVB works with clients across many industry sectors to build tailor made solutions to meet their business objectives.
- managing import/export costs
- adhering to cross-border budgets
- fixing costs on overseas acquistions/disposals
- benchmarking investment projects
- protecting overseas investments to be monetised in the future
The decision to hedge should be determined by considering the potential impacts of currency fluctuations on budgets, future earnings, costs and capital investment.
The objective of hedging is to reduce exposure to adverse currency movements and protect P&L, rendering it as close to 'currency neutral' as possible, unless the client seeks some exposure risk.
Once the hedging strategy is in place clients benefit from RVB's ongoing monitoring of all their currency exposure to ensure that they remain protected in the market place.
There are two fundamental types of direct foreign exchange risks that need to be addressed:
Transactional risk: associated with the time delay between entering into a contract and settling it. The greater the time differential between the entrance and settlement of the contract, the greater the transaction risk will be.
Translation risk: associated with businesses that deal in foreign currencies or list foreign assets on their balance sheets. The greater the proportion of asset, liabililty and equity classed denominated in a foreign currency, the greater the translation risk.
If a client decides not to hedge the entire exposure, but to be partially hedged, in order to retain an element of exposure to the currency market Limit Orders (to benefit from an improvement in the rate) or Stop Orders (to protect against a falling rate) can be placed to execute automatically, providing a form of security in the market place.
There are a wide variety of financial instruments that can be used in different combinations to build a hedging strategy, however RVB finds tha most objectives can be achieved in a cost effective manner without resorting to convoluted products which are over-priced, inefficient and often confusing.