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What is currency risk?

Currency risk is the risk of financial loss due to adverse exchange rate movements.

What is currency hedging?

Currency hedging is an approach that is used to mitigate and reduce currency risk. It minimises the exposure of an investor during unfavourable movements in exchange rates by using various financial instruments. Currency hedging is considered as insurance during international currency trading.

Who is a potential client of Silhouette Capital?

Any entity or person who is exposed to foreign exchange markets is a potential client of Silhouette Capital. This includes companies or businesses that import or export goods or services as well as private individuals who have offshore investments.

What is treasury outsourcing?

Treasury outsourcing is the process of contracting the function of an in-house treasury to an independent organisation where the process is purchased as a service.

Why outsource your treasury?

The practice of outsourcing a business function, instead of providing it internally is a very common feature. It is cost effective to outsource the treasury functions of a company. It also enables a client to gain access to the expertise of Silhouette Capital who is specialists in the currency risk management field.

What are alternative hedging solutions?

Spot rate transactions and forward contracts are the most common tools used by small and medium enterprises (SMEs) to transfer currency. There are various other instruments available that can be used in limiting or offsetting the probability of a loss due to fluctuations in the prices of currencies. These strategies usually include participation and enhancement strategies.

Reasons why alternative hedging solutions should be included in currency hedging portfolios

Although spot transactions and forward contracts offer good protection to clients, it still leaves the client fully exposed to risk. And while forward contracts protect a client against adverse currency movements, clients do not have the benefit of participating should exchange rates move in their favour.

Participation strategies allow clients to have protection but also flexibility if the market moves in their favour. Enhancement strategies give the client the opportunity to outperform the market related forward contract.

Silhouette Capital assists clients to obtain a comprehensive understanding of various alternative strategies before making decisions.