Protect
Protects the business against unfavourable fluctuations of exchange rates.
Fix
Ensures future cash flows at a fixed rate.
Manage
Allows cash flows to be managed more finely, providing assurance about future expenses and income – key for budget planning.
What is FX risk mitigation?
Foreign exchange rate risk occurs when your company conducts transactions in different currencies. Fluctuations in foreign exchange rate can impact a business’s operating profit and cash flows, jeopardizing financial results.
LHV offers various solutions for mitigating exchange rate risk and ensuring your company’s stability.
At LHV Pank, you can use foreign exchange derivatives such as currency forwards and swaps to hedge against fluctuations in exchange rates. These instruments let you lock in a definite exchange rate for a future transaction, reducing uncertainty and risk.
FX derivatives offered by LHV
FX forward – a measure of safety for future transactions
Currency forwards are transactions that let you exchange a fixed amount of in one currency for an amount in another on a future date at an agreed exchange rate.
Particularly useful for businesses that want to mitigate currency risk arising in the future, preserving the certainty and stability of cash flows.
FX swap – flexible options for managing cash flows
In an FX swap, the parties exchange an amount in one currency for an amount in another at a fixed exchange rate and agree to conduct the reverse of the transaction at an agreed date for an agreed rate.
An FX swap is ideal for businesses that need liquidity at a certain time but want to avoid exchange rate risk.
Example
A company operating in Estonia that uses the euro as the everyday settlement currency sells its products in Sweden and receives a large part of the proceeds in Swedish kronor. The company is worried that the krona may weaken against the euro, eroding their profit. The business enters into forward exchange agreements, locking in the exchange rate for future revenue and ensuring a fixed income that is not affected by changes in the market exchange rate.
Contact us
Our experienced experts will help you find the best solution that will meet your business’s needs, be it protection against short-term risk or long-term risk management. With LHV Pank, you can ensure sustainable operating activity and focus on growing your company.
Call 684 8388 or email us at treasury@lhv.ee
