By: Sakthi Prasad --
12 February, 2015
As the earnings season is under full swing in the U.S., a number of companies have said that a strong dollar has hurt their quarterly profits.
Companies that have a solid presence outside of the U.S. get hurt by a relatively stronger dollar because it would mean less revenue from overseas sales once converted back to dollars. Also, export-oriented companies face headwinds as their dollar denominated products or services become relatively expensive.
Large procurement organizations source raw materials and services across the globe and may have to deal with payments in different currencies. Currency risk always hover about the procurement function because an overseas supplier may not be incentivised to sell the materials or services if the forex rate is unfavorable.
And to be sure, currency hedging is usually the responsibility of treasury department and procurement function per se doesn't have much control over it.
Given the unpredictable nature of the currency markets, what steps the procurement organizations can perhaps undertake to minimize, if not altogether eliminate, adverse currency situations?
Here's our 2 cents:
The world of currencies is full of uncertainties and it is quite tough for someone to get it right all the time. However, procurement organizations can still look to take steps to help their treasury peers ward off this uncertainty to an extent possible.
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