Can buyers afford to ignore currency risks?

29 April 2010
A couple of things struck me while writing the cover feature on the risks of exchange rate and currency fluctuations for the latest issue of SM. First was simply the difficulty in finding people in the profession who had experience of tackling the inherent risks the money markets can pose to buyers. Many of the procurement leaders I contacted said it wasn’t something they dealt with. Why they didn’t seemed to fall into two categories. It either wasn’t something they had considered, or it wasn’t something they were allowed to deal with because it was the responsibility of somebody else in the company. As one major European CPO told me: “It’s a bit over my head at the moment.” Many of the market experts I spoke to highlighted the fear that accompanies terms such as derivatives and hedging, but all stressed that currency dealing is generally pretty simple. The other surprise to me was the emphasis on collaboration – both with vendors to share the risks of volatility and working together with internal colleagues to protect the company’s position. It was perhaps all too predictable to hear decisions to source in certain locations were being made without consideration of currency risk – and that currency hedging strategies were being devised without knowledge of where the company was sourcing. As the advice from the experts explained, managing exchange rate volatility doesn’t have to be a strategy that is “easier said than done”. If you aren’t already, just start talking about what you can do. I would strongly advise against burying your head in the sand, because this isn’t an issue that is going to disappear.
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