It is essential to understand what currency risk is. Exposure to currency risk occurs when fluctuations in exchange rates can have a negative (or positive) impact on a company's income, costs, or profit margins. For importers, exposure to currency risk occurs between the time a product/service is purchased and the actual payment. For exporters, it occurs between the time a product/service is sold and the actual receipt of the sale proceeds.
If a European company sells products in the United States and the dollar weakens against the euro, the revenues generated in dollars will be lower when converting those dollars into euros, leading to financial losses. On the other hand, if the dollar strengthens against the euro, the company could record higher profits when converting the dollars. These exchange rate variations can be unpredictable and are often influenced by global macroeconomic factors, increasing the volatility and complexity of currency risk management.
Managing currency risk is a crucial element of financial management for any internationally operating company. It protects profitability, maintains competitiveness, and maximizes profit opportunities while minimizing exposure to exchange rate fluctuations. Companies that do not effectively manage their currency risk expose themselves to unforeseen variations in their financial results, and excessive exposure to currency risk can lead to significant financial losses, threatening the cash flow and viability of the company. It is imperative for any company to establish solid currency risk management policies and strategies to ensure long-term financial stability.
Currency risk management is not just about protecting against losses; it is also an opportunity to maximize profits. Companies can use financial instruments such as futures contracts, currency options, and currency swaps to actively manage their exposure to currency risk. By adopting a proactive approach, a company can take advantage of profit opportunities when exchange rates are favorable, while limiting losses in the event of unfavorable fluctuations.
Effective currency risk management can also enhance the company's competitiveness in international markets. By protecting profit margins against exchange rate fluctuations, a company can maintain stable prices for its products or services, giving it a competitive advantage. Companies that do not manage their currency risk may be forced to adjust their prices unexpectedly, making them less competitive in global markets.
Mondial Change offers the most comprehensive offer on the market for currency risk management as it aggregates the hedging capabilities of several payment institutions and/or investment firms among the best in the world. As a broker in banking operations (COBSP) and financial investment advisor (CIF), we have established strategic and technological partnerships with several institutions specialized in this field. Thus, by using Mondial Change for your exchange rate coverage, you benefit
from the cumulative capabilities of our partners while having Mondial Change as the sole point of contact for the daily management of your operations. We can offer solutions for coverage (futures contracts, options, or NDFs) in up to 75 currencies. You can check our overall capabilities for currency risk management with all partners here. Detailed information on currency risk management for each currency can be found by clicking on the ISO code of the currency.
Often your banking partner is unable to provide you with 100% of the credit line you need to cover your currency risk. In this case, you need to approach other banks or specialized providers to obtain the lines you lack. This multiplies the interlocutors, and your coverages end up scattered with different reporting systems.
Our network of partners generally allows us to provide you with 100% of your credit line needs. We take care of all administrative procedures related to opening accounts and lines with our partners. Your sole contact remains your Mondial Change advisor. Our back office centralizes the coverage positions you have with our various partners and provides you with a unified version of your coverage portfolio.
At any given moment, you can reach out to your dedicated advisor to stay informed about market trends and collaboratively devise optimal strategies to hedge your foreign exchange risk. As an authorized financial investment advisor (CIF) regulated by ORIAS, we assure the credibility of our interactions. We take the time to analyze the nature of your currency flows, enabling us to offer flexible, tailor-made solutions for your hedging needs. Our economist also produces a weekly report sent to you every Monday morning to keep you updated on major trends in the currency market.
Foreign exchange hedges are validated over the phone with our trading floor, reachable from 8:30 am to 7:00 pm for these operations. Hedging transactions on forward contracts involve a simple agreement between you and your advisor recorded on a registered line. Hedging transactions involving foreign exchange options or Non-Deliverable Forward (NDF) contracts necessitate the prior sending of a suitability report to ensure that the proposed hedging strategy adequately meets your
needs. Upon validation of hedging transactions, you receive an email confirmation detailing all transaction characteristics.
The exchange rates offered for your hedging transactions are always communicated before the validation of operations. Spreads applied by Mondial Change on operations vary based on criteria such as the client's annual currency volumes, the currency pair traded, or the type of hedging instrument used. Spreads are subject to negotiations between Mondial Change and the client before the validation of operations.
Every validated hedging transaction results in the sending of a confirmation email, encompassing all elements of your transaction (amount, exchange rate, counter value, value date, fixings, barriers, etc.). Before the maturity date of forward contracts and before fixings for FX options, you receive an email and/or a call from our trading floor to remind you of the deadline. At any time, you can retrieve a centralized and unified version of your hedging portfolio, detailing the hedges you have with one or several of our partners.
You can make drawdowns on forward contracts online or by contacting our trading floor, specifying the account details to which you want the funds to be transferred. This can be one of your bank accounts or the bank account of one of your beneficiaries. When a forward contract matures, you can request an extension of the term of this contract, with our reservation of the right to accept or decline the extension. Regarding fixings on FX options, we can convert the delivery of spot currencies into an open window forward contract to offer maximum flexibility.
Our technical team undertakes specific developments tailored to your foreign exchange risk management needs. This includes data integration into your internal software for reporting purposes, communication of data on gains and losses from foreign exchange, or the automation of hedging based on your criteria. Being technologically connected with all our partners allows you to retrieve all data related to your hedging operations with any of our partners through Mondial Change. Therefore, using our intermediary and leveraging our partner network is more advantageous than engaging with entities outside our partner pool.
