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Risk Management

FX Risk Management: Contingent Risks, Foreign Contracts and Tendering

2016-09-08 09:20

“ANZ designed and executive a completely customised solution to address the contingent exposure we faced as part of winning our largest foreign project.”

MANAGE RISK & EXPOSURE

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We won a very large contract supplying aircraft electronics to a new US-based customer. The revenue stream from it would be 100% in USD – buying AUD and selling USD. The contract itself was separated into three distinct tranches executed over a number of years with certainty around tranche one only. All pricing had been fixed up front and we faced uncertainty around future earnings. We felt exposed as a business.

The solution ANZ recommended and executed included:

  • A deferred delivery option hedge solution, absolving us from future delivery obligations should the contract not continue beyond tranches one and two and the AUD/USD exchange rate move against us.
  • The ability to protect our future revenues in a credit effective manner.
  • 100% hedge our currency risk.
  • The ability to protect ourselves in the long term with no obligation to deliver should there be unfavourable FX movements.

Our customer would like to remain anonymous.

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FX Risk Management: Contingent Risks, Foreign Contracts and Tendering
2016-09-08
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