CASE STUDY: FX Risk Management
Contingent Risks, Foreign Contracts And Tendering
“ANZ designed and executive a completely customised solution to address the contingent exposure we faced as part of winning our largest foreign project.”
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Find out more about better management of your foreign exchange risk with ANZ.
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.
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