The Volatile Rand: Three Tips to Prepare Your Business for the Inevitable

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In today’s financial climate, trying to predict the performance of the Rand against other major currencies is about as easy as trying to predict the Lotto numbers: virtually impossible.


Even the most experienced economists and currency experts will tell you that trying to prepare your business for what could (or could not) happen in a month or even a week’s time, is like playing the weather man: more often than not, you’re usually way off.


People are starting to feel the pressure to make sure they are always prepared for any financial situation.


Here are some tips to prepare your business for the effects of any fluctuating exchange rates:



1.     Hedging (Forward Exchange Contracts)


When it comes to protecting your funds or business, purchasing Forward Exchange Contracts could be a good move.


Try and purchase Forward Cover whenever you can. That way, there will be little to no room for any exposure to exchange rate fluctuations.


When you purchase Forward Cover, don’t speculate or make assumptions. Do your research and decide based on the facts. By hedging your funds, you are also protected against any sudden shifts in the exchange rate.



2.     Use Available Resources


Businesses that rely on imports and exports in their daily operations should consider using available resources wherever they can.


If you import on a regular basis, try and build up a reserve of foreign currency. Try and make use of foreign currency accounts when paying your overseas service providers. Doing business this way is extremely useful in the event of the Rand taking a nosedive, and so the blow could be a lot gentler.



3.     Adapt, Adjust, Be Proactive


While it’s often wise to stick to your standard operating procedures when times get tough, there may be times where you’ll need to loosen your grip and go with the flow.


Deviate from standard procedures if you have to. Be proactive rather than reactive. Do what you can to observe market trends and keep an eye on the exchange rate constantly.


With all of this in mind, the take-home message is this: preparing your business for the unexpected doesn’t necessarily mean making any exchange profits, but rather avoiding any exchange losses.


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