President Thabo Mbeki made reference to the adverse affect that volatility of the South African Rand has had on South Africa’s export manufacturers. I’ve posted quite a bit about hedging recently, but it seems that the issues just won’t go away.
Volatility hurts planning capabilities. Hedging can restrict the impact of volatility for certain durations. Maybe the exporters need to reconsider the “evil” that is hedging?
With a detailed, technical analysis of the financial and other risks inherent in a business, the appropriate risk management strategies can be defined. Value can be created through the application of these business tools, but only after the application of some sense and knowledge on the damage that volatility can do to a business and sensible measurement of the costs and benefits of alternatives.