Tanzania, 23rd November 2017.Financial risk management if properly implemented, can limit the negative impact to businesses, according to a Global Markets expert.
Standard Bank’s Executive & Head (Client Solutions, Africa Regions, Global Markets), Reginald Mlangeni stated that a currency hedging strategy can protect a company if the value of a currency falls sharply.
Mlangeni was speaking in Arusha recently during an eye opening hedging session organised by Stanbic Bank Tanzania for its commercial and corporate clients, to discuss effective ways on how to manage currency and interest rate risks in their businesses. This was in a bid to effectively address currency and interest rate risk at the systemic level.
Standard Bank trades locally as Stanbic Bank Tanzania and is amongst the few banks that currently offer forex and Interest rate hedging solutions in the country.
Hedging is a risk management strategy used in minimizing or offsetting probability of loss from fluctuation prices of commodities, currencies or securities.
“All companies are exposed to market risks arising from a combination of business activities. This may result in currency and interest rate risks. These market risks have a great impact on profitability and operations of the company. Having identified these risks, companies should be in a position to follow proper risk mitigation procedures by using derivative instruments to moderate their exposures,” he said.
Speaking during the forum, Stanbic Bank Tanzania’s acting Head of Global Markets; Ester Manase mentioned the potential instruments that can be used for the purposes of managing risks which are; interest rate swaps, forward contracts, currency and interest rate options, citing that they can be used either in isolation or collectively.
“Stanbic Bank aims to continue being the dominant provider of hedging solutions in its markets. We assist clients in identifying risks resulting from their chosen funding and operational frameworks, exploring optimal solutions for mitigating these risks,” she said.