Executive Briefings

Currency Fluctuation Illustrates Hidden Costs of Outsourcing

There are a number of costs in any outsourcing contract that may not occur to you until it's too late to do much about it. Currency fluctuation is illustrative. Because of it, last year's invoice of $1m a month, for example, could be $1.4m today. What to do?
Hedge the currency risk by including caps and collars in the contract. For example, you and your service provider might agree to share responsibility for currency adjustments up to a certain dollar amount, beyond which you'll go back to the table and renegotiate. By hedging the risk in this way, many domestic companies protected themselves against the devaluation of the U.S. Dollar.
Source: CIO Insight, http://www.cioinsight.com

There are a number of costs in any outsourcing contract that may not occur to you until it's too late to do much about it. Currency fluctuation is illustrative. Because of it, last year's invoice of $1m a month, for example, could be $1.4m today. What to do?
Hedge the currency risk by including caps and collars in the contract. For example, you and your service provider might agree to share responsibility for currency adjustments up to a certain dollar amount, beyond which you'll go back to the table and renegotiate. By hedging the risk in this way, many domestic companies protected themselves against the devaluation of the U.S. Dollar.
Source: CIO Insight, http://www.cioinsight.com