Banking platforms reduce foreign exchange risk

Written by: Marcin Serafin who manages the Client Transactions Department at Treasury Department, Bank Millennium

As there is a high demand for food, dairy industry has an essential position in exports of the Polish agri-food products to the European Union and developing countries. The share of dairy sector in the foreign trade exposes it to a risk connected with the fluctuations in the foreign currency rate. It has a basic influence on the net financial result especially at these companies, where the operating margin oscillates at a border of a few percentage points. To meet the challenges, the entrepreneurs are increasingly often using the bank products dedicated to foreign exchange risk management. In the dairy industry the most popular product is Forward transactions, whose settlement date extends beyond a horizon of even one year.

A majority of the banks, including Bank Millennium, also permits the clients to sign the transactions by means of the electronic channels. Using them, the companies carry out the foreign exchange transactions (including forwards) having access to the rates just in the inter-bank market, even for small amounts (from EUR 1000). In this way the companies can dynamically react to the changing market situation as well as buy/sell the currencies at the moment selected on their own. Signing the contracts independently saves time and, as there is access to the wholesale prices, it reduces the service costs.

This comment was published on 16th November 2016 in Rzeczpospolita daily