Explain ways in which Striking Furs can protect itself against the losses that would arise from a sudden increase in the foreign exchange rate.
The foreign exchange rate affects the profit margin of companies and cooperation that operates in more than one country. The exchange rates are never stable. They fluctuate either upwards or downwards. Fluctuation can affect the profit margin either positively or negatively. As an investor, it is essential to understand how quickly the exchange rates can change over a short period. If your client from different countries decides to send their invoice into their currency and the prices turn against you, therefore you are going to record a loss or a reduction in your profit margin. For you to maximize your profit margin, you will have to protect your business against the changing exchanging rates.
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For the Furs to protect themselves, they will have to come up with a foreign currency account, which will be able to receive or accept payment using the foreign currency. Several foreign-current accounts will be needed to serve different clients from different countries as foreign currency fluctuate, causing losses due to high exchange rates. Another method to use will be the use of Currency option. This will be done by protecting the exchange rate and participate only when the market is in favor of the currency.
Another way for Fur to protect them is by placing a different market order. The market order will help the Fur to request for a conversion of foreign currency for a particular exchange rate and amount. The corporation will need to keep watch on the markets exchange rates until it reaches the required level is when they make the request. A straightforward solution that will help the organization to maximize profits is to make huge retail sales when the exchange rates favor your currency. The customers should be requested to pay in US dollars helping them to bear the risk of only one currency.
