Posted On : 26-04-2018

The Importance of Hedging in International Business

Pentingnya Lindung Nilai Dalam Bisnis Internasional

There are many components that affect the income statement, including income, operating expenses, interest costs, etc. In practice, especially those who own an international scale business, the exchange rate of rupiah also plays an important role.

There’s usually a trend for using US dollars in performing transactions despite that it may result in exchange rate fluctuations. However, now you can address this issue with the use of hedging

A while ago, quoted by Smart-Money, Executive Vice President of Treasury & International Banking Division Branko Windoe said that the average hedging cost is 5%-10%. “Given the depreciation of the rupiah’s value, business actors can garner more benefits with hedge accounting,” he said.

In March 2018, the average daily depreciation of the rupiah’s value reached 1.13%. Executive Director of Financial Market Development Department of BI Nanang Hendarsah agreed that export and import activities require hedging.

According to Nanang, business actors’ dependence on the US dollars in such transactions can be reduced by hedging. More specifically, Nanang suggested the use of LCS (local currency settlement) framework to mitigate the risk of weakening the exchange rate, especially for transactions using Malaysian Ringgit and Thailand Baht.

“The implementation of LCS provides many advantages, such as reducing US dollar’s hegemony as a payment currency. Furthermore, it can also reduce pressure on the demand for foreign currency and make transactions performed more effectively by using Ringgit or Baht,” explained Nanang.

Nanang further said that the LCS framework will also make foreign exchange currency more secure, lower hedging costs, and provide alternative access to investment in each country. “The business community must be alert to exchange rate fluctuations that should be anticipated with currency hedging,” said Nanang.

As the pioneer in implementing the LCS framework, you can access the service at PT Bank Central Asia Tbk (BCA). This BCA service will ease your export and import transactions using Ringgit or Baht.

Pentingnya Lindung Nilai Dalam Bisnis Internasional

It can happen because now BCA is facilitating bilateral transactions with Malaysia and Thailand through the rupiah-ringgit and rupiah-baht LCS framework. This commitment of BCA aims to expand the forex transactions and remittance services.

“Thanks to the support of more than 2,000 correspondent banks, we are continuously keeping up with the latest banking technology. BCA is always ready to help make and receive international payments smooth,” said Branko at Remittance Customer Seminar BCA 2018 in Surabaya recently.

Branko continued, in order to ensure security and service excellence, BCA will continue to socialize the rules, new products or specific things related to remittance. “(One of which is) about Bank Indonesia (BI)’s new policies regarding Local Currency Settlement (LCS),” he said.

Branko added, BCA’s reliable security system will also provide a sense of security to customers. “Related to frauds and sophisticated hacking carried out by perpetrators, this has become our main agenda,” Branko concluded.

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