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I mean to say how you will manage the buying and selling keeping in view market fluctuation and the fact that your home currency in different. How you will minimise currency loss.
The foreign currency risk can be managed in some of the following manner;
1) Hedging strategies like SWAPs, Forward Covers etc
Example:.
a) Foreign currency fluctuation risk for landed cost calculation of of Pipeline planned orders can be hedged through Forward contracts.
b) For Customer guarantees in local currency for a specified period, can be hedged using SWAP arrangements.
2) Raise invoice in foreign currency if the Local Statutory regulations allows.
3) Based on external factors, historical trend, bank advisory, make timely conversions.
4) For excess funds, invest in foreign bonds.
When u buy a product to your Your company invoice has to be raised for the country exported namely your country and payment can be from any currency unless specific curreny agreed upon .Hence if tho e seller has the same account funds can be transferred from that accounts.So the Financial Manager should be prudent enough to forsee the transaction and keep the balance accordingly to avoid any exchange loss.Otherwise Forward contract or swap etc can also be followed.
Firstly, i will follow the stock exhange market in detail to keep all taps on market position daily exchange rates and fluctuations.
Secondly, i would prefer not to keep any balances in my offshore accounts apart from the budgeted value. If possible i would like to keep clean my offshore accounts to avoid currency losses.
I beleive instead of keeping the liquidity in bank accounts ist good to invest in short term policies.
Thanks for inviting. I agree with the expert answers:
Currency risks can have various effects on a company, whether it trades domestically or internationally. Transaction and economic risks affect a company's cash flows, while transaction risk represents the future and known cash flows. Economic risk represents the future but unknown cash flows. Translation risk has no cash flow effect, although it could be transformed into transaction risk or economic risk if the company were to realize the value of its foreign currency assets or liabilities. Risk can be tricky to understand, but by breaking it up into these categories, it is easier to see how that risk affects a company's balance sheet.
From the finance point of view I will suggest to use hedging & swaps to reduce the risk.
Every transaction is recorded in the default currency of the company.
-Because transactions occurring in another country,Odoo stores both the value in the currency of the company & the value in the currency of the transaction
-When we have a bank account in a foreign currencies, for every transaction,there are two values
*The debit/ credit in the currency of the company
*The debit/ credit in the currency of the bank account
- Currnuncy rates are updated automatically.
