Manage your foreign exchange exposure with forward contracts

Lock in an exchange rate to secure your future cross border payment needs, and protect your business from adverse foreign currency fluctuations.
Forward contracts
 

What is a forward contract?

A forward contract is a foreign exchange product that allows you to secure an exchange rate for a future date on a predetermined volume of currency.

Businesses typically use forward contracts to secure exchange rates for their known future international payment needs.

With WorldFirst, a forward contract can be entered to facilitate payments for identifiable goods, services or direct investment (making a capital investment in an enterprise to obtain a lasting interest in it).

You will be able to lock in an exchange rate for up to 12 months.

 

Benefits of booking a forward contract

Locking in an exchange rate with a forward contract means you know exactly what exchange rate you’re getting, for a set time. This helps you predict cash flow so you can be more prepared, more accurate and more competitive with your planning.

Four questions to consider before booking a forward contract

1. Will market rates move drastically? 

Exchange rates can be volatile. With a forward contract, you would have secured a predetermined exchange rate for your future payments. This mitigates your financial exposure to currency fluctuations for that future payment. 

2. What is your risk appetite?

You must consider your cash flows and budgets when booking a forward contract. A forward contract is a committed contract to deliver a foreign currency payment at a predetermined rate. It may be worthwhile considering other strategies if you are unsure of your requirements.

3. What is your purpose for using forward contracts?

You can enter a forward contract exchange with WorldFirst in order to pay an upcoming invoice in a foreign currency, or in preparation of an upcoming purchase in a foreign currency, but would not be able to trade forwards for speculative purposes.

4. Do you have other obligations?

There is an initial 5% deposit requirement called a margin, to be paid upfront to secure the forward contract and this is associated with the notional amount of your forward contract. 

 

How to book forward contract

How to book a forward contract

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