Exchange rate risk can be avoided or managed to some extent. How to manage or avoid exchange rate risks for industrial and commercial enterprises participating in the international economy?

First of all, exchange rate risk should be included in the price. The simplest way is to fully include the range of possible exchange rate fluctuations during the contract period in the price. This situation requires the exchange rate risk aversion party to have complete pricing power and completely transfer the exchange rate risk to the counterparty. For example, suppose the fluctuation range of local currency exchange rate is 5% during the contract period, which may rise or fall. In this case, if the party with pricing power exports, the quotation will increase by 5%, and if it imports, it will decrease by 5%. If the exchange rate fluctuates against the pricing party, he will still get a normal profit, because the exchange rate risk is considered in the price. If the exchange rate fluctuates in his favor, he will not only have no risk, but also get unexpected benefits from the exchange rate fluctuation. It is difficult for ordinary industrial and commercial enterprises to have this pricing ability, and only enterprises with absolute monopoly position can easily do it. Therefore, the general practice is to add an exchange rate risk sharing clause to the contract, which is shared by both parties to the transaction.

Second, use financial instruments in exchange rate to manage risks. At the time of signing the import and export contract or after signing it, people who predict that there will be exchange rate risks can use financial instruments such as forward foreign exchange transactions, currency options and exchange rate futures to fix costs or gains, thus avoiding exchange rate risks. Theoretically or in mature markets, the means to avoid exchange rate risks include forward contracts, loan hedging, swap hedging, balanced liability, factoring and foreign exchange options. The second one will be selected slightly, which will be introduced in detail below.

(1) Forward contract: A company with foreign exchange claims or debts signs a forward contract with a foreign exchange bank to buy, buy or sell foreign exchange, so as to buy and sell two currencies at a certain time in the future at the established exchange rate. The forward contract time is usually half a year, and there is no alternative. For example, an importer expects to pay a US dollar to a foreign importer within six months. In order to lock in the financial cost, enterprises can sign forward sales contracts with banks in advance. In this way, after six months, no matter how the exchange rate changes, enterprises can buy US dollar loans from banks with RMB according to the pre-agreed exchange rate. More flexible is the option forward contract, which allows trading at any time within the time limit stipulated in the contract, subject to the exchange rate at that time. In this way, exporters can get better protection, avoid unfavorable time exchange rate and choose relatively favorable trading time and exchange rate during the contract period.

(2) Responsibility balance: in the same period, create a reverse capital flow with the same currency, the same amount and the same term as the risk currency. For example, when an export enterprise receives an export payment of $5 million from a foreign importer, it must convert the payment into RMB for domestic expenditure, but at the same time it needs to import raw materials, and will pay the payment of $5 million within three months. At this time, the enterprise can handle a RMB and foreign currency swap business with the bank for three months: sell $5 million immediately to get the corresponding RMB, and buy $5 million for three months in the future. Through the above transactions, enterprises can bridge the capital gap and avoid risks.

The above mentioned two exchange rate risk management methods can be used jointly in actual economic activities. Even under each method, there are many specific practices to choose from. Industrial and commercial enterprises should combine flexibly in specific applications to avoid risks. The curtain of a new round of RMB exchange rate reform has been opened, and future exchange rate risks are inevitable. In order to be in an invincible position in the future international market competition, enterprises must strengthen research in this field from now on to enhance their competitive advantage.