Foreign exchange risk calculator

Every overseas transaction involves a risk to your business, whether you are exporting or importing goods or services. Adverse foreign exchange movements can wipe out your profits if they are not managed, so it pays to calculate what your potential risk is on each transaction.

What’s the risk?

There are some very sophisticated methods for dealing with the risk of foreign exchange (forex) movements. But sophistication comes at a price, can be complex and is therefore often outside the reach of most SMEs. However, there are some simpler ways of managing forex risk that you could consider as part of your armoury.

As well as hedging products offered by banks, there are some simple techniques you can adopt to manage your overseas transactions, e.g. shorter credit periods and use of penalty clauses. But first you have to calculate what your potential risk is by using a Foreign Exchange Risk Calculator (one for selling and one for buying) for reporting to the board.