Example 1

Amanda runs a successful business that imports furniture from overseas. She has a clear ability to forecast her requirements and regularly needs to convert GBP to USD in order to pay her suppliers. Amanda is in a competitive sector has a healthy profit margin when buying her furniture at an exchange rate of 1.25 or above.

With the GBP/USD exchange rate currently above 1.25, Amanda decides to take the proactive step of securing a forward contract for 50% of her business's annual exposure at a favourable rate of 1.30 for a period of 12 months.

By securing the forward contract at a rate of 1.30, Amanda has effectively mitigated a significant portion of her company's currency risks whilst still retaining some exposure to potential market movements above 1.30, thereby enabling her business to remain competitive. Additionally, the flexibility of the contract allows Amanda to utilise any amount of the forward contract during the 12-month period, as and when needed.

Example 2 

Jason runs a UK manufacturing business and has successfully won a contract in Canada. Jason’s business will be paid in full with Canadian dollars in 18 month’s time. Jason had planned his currency risk prior to securing the contract and immediately decides to take out a forward contract for 18 months selling Canadian dollars and buying GBP, his domestic currency. He has now removed any adverse currency movements and secured his profits.

In 18 months time, Jason will receive the GBP converted from Canadian dollars at his agreed exchange rate.

*All testimonials, reviews, opinions or case studies presented on our website may not be indicative of all customers. Results may vary and customers agree to proceed at their own risk.