One thing I recommend to my clients with foreign revenue or expenses is to come up with a budget rate.
For those unfamiliar, a budget rate acts as a stable reference point enabling accurate budgeting and forecasting. In other words, at this rate, the company can operate within the correct margins.
To protect this budget rate, some companies hedge the currency risk with derivative contracts ensuring that their sales revenue doesn’t decrease throughout the year and their expenses don’t increase because of currency fluctuations.
Does your company derive a budget rate annually, and/or do they mitigate their FX risk in any way?
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