Foreign economic activity during significant exchange rate fluctuation

Foreign economic activity during periods of intense exchange rate fluctuations poses significant financial risks.  As such, the necessity of correct financial management is becoming a top priority in relation with the internal optimization and the main economic challenge is to retain revolving funds.

Assets in the form of currency or liabilities in the form of debts are the daily result of engaging in any form of economic activity.  These assets or liabilities during times of high exchange fluctuations of impact the Profit and Loss of the company (more of than not to the detriment of the company). 

EMG strongly recommends regularly evaluating your currency position and useing simple and comprehensible management tools to diversify your currency portfolio as currency exchange gains and losses can seriously impact your financial statements.

  • Concluding agreements between the parent companies and Russian subsidiaries in rubles, thus shifting the currency risk to the parent company (the parent company is usually better able to carry this risk and may have better access to hedging instruments)
  • Insuring that contracts allow for making advance payment / performance of contracts when there may be an opportunity to purchase currency at a favorable exchange rate. 
  • Keeping a close eye on when foreign currency payments are due regularly purchasing currency during periods when demand for foreign currency may not be as high
  • Making currency reservations in contracts for the supplies and loans. To make payments you may consolidate the upper limit currency by this reservation.

These are only a few common – sense methods for risk management.   For more details, please contact EMG specialists.


Tom Stansmore
General Director
Olga Semenova
Partner. Chief Operating Officer