How can foreign traders avoid the pitfall of foreign exchange losses?

Foreign traders face the risk of exchange losses caused by exchange rate fluctuations when trading goods. Although this risk cannot be completely avoided, Huafukang Supply Chain believes that some methods can be adopted to reduce its impact:

1. Improve the mechanism and effectively manage exchange rate risks

Enterprises must establish a " We should adhere to the "risk-neutral" financial concept, strengthen the training of financial personnel, formulate reasonable hedging strategies, follow the principle of simple application, and choose products that match the company's financial capabilities to avoid greater risks caused by improper use of products.

2. Rational use of derivative financial instruments to reduce risks

At present, institutional exchange rate hedging products are complete in variety, and various combinations such as forwards, spot, and options can basically meet the daily needs of enterprises. required.

(Forward exchange settlement to lock the exchange rate, handle RMB and foreign currency swap business)

3. Take the initiative and add exchange rate clauses to the contract

Enterprises should fully consider the exchange rate In view of the changes in income that may be caused by fluctuations, when signing contracts with suppliers, proactively add hedging clauses to allow the exchange rate to adjust within a certain range. If the actual exchange rate fluctuation exceeds this range, the resulting exchange rate losses will be shared equally between the buyer and the seller.

4. Make good use of policies to improve fund operation efficiency

Using multinational company fund centralized operation and management policies and various trade and investment facilitation pilot businesses can improve corporate fund management efficiency and facilitate Enterprises can flexibly and proactively control the time of fund collection and payment, helping enterprises to effectively reduce financial costs.

5. Give priority to local currency and stay away from the risk of exchange rate fluctuations

In foreign export transactions, enterprises should use local currency for settlement as much as possible. Under the condition that foreign currency transactions must be used, they should choose to trade in international finance. Currencies that are freely convertible on the market, such as euros, pounds, etc.; when exchanging currencies, you should avoid "soft" and "hard" and choose hard currencies.

6. Make full use of the financing facilities in the settlement method

Export bill transfer

Under the settlement method of collection and letter of credit, the export enterprise will contract ( or a letter of credit) as collateral to finance financing from the bank. Under this business, foreign trade enterprises can obtain advances from banks with interest deducted and recourse rights reserved before payment from foreign debtors, thus accelerating capital turnover.

Bill discounting

The export enterprise applies to the bank for discounting the unexpired bank acceptance bill or commercial acceptance bill. The bank deducts the discount interest from the face value and pays the remaining balance to the export enterprise. . The current RMB exchange rate is unstable and has a greater tendency to appreciate. If export companies are worried about losses in export receipts, they can make up for it appropriately through bill discounting.

Guaranteed payment agency

Export enterprises grant their accounts receivable to banks, and banks provide export enterprises with bad debt guarantees, payment collection, sales ledger management, trade financing and other financial services. Serve. Generally used in transactions involving the export of goods or services using credit methods such as credit sales. This method locks in the credit risk of the importer. After the foreign trade enterprise transfers the claims on the accounts receivable to the bank, it can obtain financing, obtain the foreign exchange receivables in advance, and then handle the foreign exchange settlement procedures in accordance with the current national foreign exchange management regulations. This not only achieves the purpose of avoiding exchange rate risks.