Does your company tender for business?
Do your tenders potentially involve foreign exchange?
If your tenders do involve an element of foreign exchange then you have introduced some uncertainty into the pricing
process of your tender. Your company faces foreign exchange risk if you:
- are tendering for business in another country
- are tendering for business that will be exported to another country (and that will be paid for in a currency other than AUD)
- are tendering for business that will necessitate you importing anything needed to fulfil the contract (that is not priced in AUD)
- are tendering for a local contract and face competition from an overseas competitor
Foreign exchange rates can vary significantly over relatively short periods of time. Tenders with long lags between
final submission of the tender price and a decision by the company calling for the tender are risky propositions
unless specific (and adequate) exchange rate related provisions have been made in the tender document. History has
shown us that the AUD can move significant distances in short periods of time. The second half of 2004 saw the worth of 1 AUD
climb from 0.7000 US cents to 0.7900 US cents (or 11%) - great for an import style business, not so good for an exporter.
Hedging these risks presents its own set of problems, the biggest of which is what to do with a hedge should the
tender not be won. The difficulty in dealing with this issue sees many tender prices go out unhedged and without
adequate provisioning. The NAB has a suite of products specifically designed to help the customer in the tender
process. Simply hit the button below to make contact with an expert in the field.
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