Just when you thought that the entire Dollar-Rupee value chaos had been refactored successfully, here comes another thorn in the flesh. After USD its the turn of British Pound to play havoc with INR. The value of Pound has depriciated by almost 5% against the INR in just a matter of few days. The Pound which was valued close to Rs.82 at the beginning of this quarter, slipped to Rs.77 in the month of March.
Its worth being noted that after the Dollar crisis, most IT companies were speeding up the process of penetrating the European market, specially UK. But now that the British Pound has also started playing games with the INR, the question that seems to be on everyone’s mind is “What next?” The good news however is that contrary to the British Pound, the Euro is appreciating in its value with reagrds to the INR.
The value of Euro has appreciated from Rs.55 to Rs.63 in a matter of three months.This entire currency uncertainty, has brought to the forefront the need for an exceptionally innovative strategy that would somewhat decrease the inter-dependency of margins and currency. How long would we be able to market our USP of providing low-cost solutions? Ploys like presenting a company as the ultimate customer satisfaction ambit is fine, but definitely some radical work needs to be done on the financial operating model. Probably the organization which comes up with the most innovative financial model to counter-attack this problem would walk away with the honours in the next decade.
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2 comments:
dude this problem is mostly solved by financial risk management in currency swaps. Also this kind of situation helps companies hedge risks by doing a currency arbitrage which is not too difficult for an MNC which deals in various companoies. But diversifying your earnings to several major currencies is often a clever idea unless you are staring into a global currency failure when commodities like metals are considered safest. You mite wonder how a technology company can do all this., But under basel you are allowed to hedge your risks irrespective of your nature opf business by buying the derivatives like swaps and futures or forwards.
You are spot on Yossarian but the fact is that diversifying to several currencies is not such an easy task for the technology companies. Unlike other sectors, it takes a lot of time for technology companies to set base in other countries. Moreover the entire currency diversification process could be an extremely proposition. As a result modifications need to be done in the feasible aspects of the financial models.
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