currency risk calculator

Currency Risk calculator to help businesses

by Angus Jones

OFX, a leading online foreign exchange and global payments provider, announced the launch of its Currency Risk Exposure calculator. This free online tool aims to support globally-minded businesses with navigating the currency risks involved with cross-border trade.

The strong volatility seen over the last 12 months meant that Australian businesses paying in USD, as an example, juggled rates as low as 0.57 in March ’20 to highs of 0.78 in Jan ’21. The OFX Currency Risk Exposure calculator was developed to help uncover the true cost of volatility when trading internationally and support companies with building confidence when dealing with global markets and foreign currencies. The free online calculator informs local companies about the potential risks of a reactive approach to currency fluctuations by providing detail of on-the-day and historic market exchange rates. 

“If you’ve ever timed a global money transfer to get the best exchange rate for your business, you’ll understand small market movements can make a big difference to your bottom line. However, many small businesses out there don’t know the true cost of FX due to a lack of transparency with their financial institutions and readily available resources.”

“The OFX Currency Risk Exposure calculator is a foundational tool that clearly outlines potential business savings to bridge that FX education and awareness gap,” said Michael Judge, Head of Australia and New Zealand, OFX.

Uncovering the real impact of currency fluctuations

Small currency fluctuations can add up. So businesses need to be aware of the effect shifting market exchange rates can have on business cash flow and understand how to plan for the good and the bad. 

Easy to use, the OFX Currency Risk Exposure calculator considers several inputs that can influence FX results. Users fill in an online form detailing the local currency where their business is based, the currency they are typically invoiced in, the typical amount of the invoice, and standard payment terms.

The calculator then compares three example cost scenarios of purchasing the desired currency – at the current market rate and at the lowest and highest market rate over the previous three months. Cost comparisons are calculated using historical currency market rates for demonstration purposes only*.

For example, the OFX Currency Risk Exposure calculator reveals that a US100,000 invoice could have cost as much as AUD 131,881 and as little as AUD 125,821 in the last 3 months – a marked difference of AUD 6,060.

Saving thousands with enhanced FX risk knowledge

The digital FX and payments company hopes the Currency Risk Exposure calculator will bring awareness to an often-overlooked factor for businesses moving money globally and encourage businesses to break pre-existing reactive habits and attitudes towards currency fluctuations.

As businesses build a more sophisticated understanding of which FX risk management strategies best suit their needs, enhancing this knowledge with FX specialist advice will position them well to minimise FX exposure to business profit margins.

“Businesses don’t need to leave their currency risk to chance or at the mercy of on-the-day rates. Forward contracts, for example, help our clients with a confirmed exchange rate for up to 12 months and, on many occasions, real savings against unfavourable changes in foreign currency markets.

“Whether your business is a newbie to FX or has a solid currency plan in place, bringing this kind of certainty to what can otherwise be an unpredictable area of business can have a big impact on earnings or equally the cost base of a business,” added Michael Judge.  

The OFX Currency Risk Exposure calculator is available here.

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