Minimize Your Currency Fluctuation Risk Exposure With Multicurrency Management in Microsoft Dynamics GPSeptember 14, 2015 7:59 am
If your SMB does business in a multicurrency environment, or is eyeing a move in that direction, you need tools to manage your risk exposure to currency fluctuation. Multinational and large corporations are built to navigate the stormy waters of currency fluctuation, and are able to devote resources to the issue that SMBs cannot afford, but luckily you have the Currency Management module in Microsoft Dynamics GP to give you the tools you need to manage your risk exposure to currency fluctuation like a Fortune 500 company.
Dann Anthony Maurno recently wrote an article for MSDynamicsWorld.com on this topic that included an informative interview with Peggy Egvleth, a Microsoft Dynamics GP implementer who specializes in multicurrency environments. She will be presenting a session on this topic at the GPUG Summit in October, and she calls the Multicurrency Management module for Microsoft Dynamics GP “the strongest package I’ve found in terms of the middle market for foreign currency.”
As the article points out, two key methods of limiting risk exposure to currency fluctuation are a natural hedge and an effective hedge. A natural hedge is investing in two or more financial instruments with the idea that the performances, good or bad, will balance out. An effective hedge is a forward contract, described by Egvleth as “a contract to sell X amount of currency at X rate on a given day, dated in the future. For example, I’m guaranteeing I’ll sell 100,000 euros at 1.15, even if that’s not as good as the spot rate of the day. You’d need to revalue up to the rate at the forward contract, but not every month because you’ve basically fixed the value.”
Making these decisions requires that you know exactly what your risk exposure is, and that’s where the Multicurrency Management module for Microsoft Dynamics GP comes in. It lets you know exactly what your balances are in both foreign currencies and your functional currency, and it enables you to get reports on multicurrency data for all open periods or for a historical year in detailed or summary form. The revaluation functionality in the module can be used at any time to see where you are at in terms of foreign exchange rate gains or losses.