Conclusion
After negotiating in trading with foreign. Conclude that they are preparing a forward Contract.
Forward Contract is a contract to buy or sell foreign currency in future by the buyer and seller agree to buy or sell any country currency in amount of trading present but in contract can specify delivery date in the future. The seller will use a Forward Contract when seller needs to know exact costs and do not want to worry or face the risk of foreign exchange. The seller can contact the Bank that uses the service. Or at banks for export for request forward Contract or so-called "forward reservations" which exchange rate contracts that will be applied in future or when the seller receives payment from the foreign buyer. The bank is like a middleman who agreed to purchase foreign currency from seller because the Bank will purchase the exchange rate. If buyers are satisfied with the Bank's offer price after that, The Bank will issue a contract to seller call this “Forward contract” which specifies the currency, amount, the exchange rate that the Bank agrees to purchase, and the term of the agreement
Both of buyers and sellers want to share the risk and want to get the most benefit because Forward Contract can distribute the risks and prevention of the risk of exchange rate fluctuations. Also know the exact costs and revenues. In addition to Forward Contract can assume the profit
Because of forward Contract is a way to diversification rick that has been very popular. It also will help to plan money in advance, know the exact cost and easy to control business.
Why didn’t choose others solve the problem? The reason is as follows:
1. The establishment of institute have professional and experienced that related to trade with foreign countries to consult the problem because The Company have to pay cost a lot not worth the benefits and The organizational structure may have a multi-step process to make a waste of time to trading decisions in each
3.Buy the right to purchase or buy the right to sell in the future because the company have to pay more cost which each bank is different. Risk more than Forward Contract. And Purchase rights intend the minimum value to buying or selling rights contract is higher than the Forwards.
4.Management of foreign currency in accordingly in both revenues and expenses (Natural Hedge) because Natural Hedge is manage revenue and expenses Such as determine the revenue and expenses to the same currency and delivered in a matching or similar. However, heart of this solution is matching or matches between cash flow as revenue from one customer came to matching expenses to any partner. If the match is offset perfectly. We can reduce the impact of currency fluctuations but if the transaction was not consistent, it cannot solve the problem and also additional problems.