Forward contracts; all you need to know in order to avoid banks’ tricks

Over the last few months we have been receiving complaints from companies misled by banks for contracting complicated FX products when they were looking for currency hedging tools, causing them to incur significant losses.Currency volatility has increased sharply since the end of 2014, which has prompted international businesses to define strategies to protect their profit margins from the wild fluctuations of a highly uncertain margin.The tool they usually need is the forward contract, that allows them to lock in the foreign currency at a convenient price at the moment of the contract, and get the funds when they need them, for example in one, six or twelve months time, regardless of the exchange rate at that moment.These companies, fully confident with their traditional bank, often call their bank requiring forward contracts, and end up signing more complicate derivatives contracts, which do not guarantee a fixed price at a future date. Instead they are offered the possibility of making higher profits, but also include a serious risk in case adverse conditions are met. In a few words, they are speculative products, not what a CFO should be looking for.In order to shed light on the forward and derivative contracts we have released the Forward Guide for CFOs. It contains all you need to know about the tools to hedge your business lines from the impact of currency volatility, and the difference with other products you might be offered by your bank or broker.