Hedging as a Service

HaaS

 

With the growth of cross-border trade, SMEs are increasingly exposed to foreign exchange fluctuations. M-DAQ is developing a cross-border risk transfer solution aimed to help SMEs limit their FX exposure.

CURRENT SITUATION

FX losses from deferred payments

 

Due to FX fluctuations, a company can suffer losses from the delay between the valuing of their contract and the receipt of payment in a foreign currency.

Uncertainty in cashflow projections

 

Without certainty in their foreign currency receivables and payables, inaccurate forecasting may result in cashflow difficulties for businesses.

No easy access to FX hedging instruments

 

Due to the lack of knowledge or constitutional restrictions, SMEs typically do not hedge their FX exposure.

HEDGING AS A SERVICE™ (HaaS)

Flexible and low-cost FX hedging

 

HaaS allows full customisation of the notional amount of FX hedged, contract term and preferred exchange rate by clients via an easy-to-use platform.

Minimise FX volatility impact on company profits

 

With HaaS, clients are not only hedged against unfavourable FX fluctuations, but also continue to enjoy any gains resulting from FX market movements.

Increase ability to forecast future cash flow

 

Clients can grow their cross-border business with confidence without worrying about future FX movement and volatility.

HISTORICAL CHART

USDSGD 3-Month Performance

Based on the assumption that a SME in Singapore imports goods from China at an invoice value of CNH 100, 000 on October 2019, payable by March 2020.

Without HaaS
Invoice Amount: CNH 100,000
Based on Mar 2020 SGD/CNH: 1.46431
SGD payable in March 2020:
CNH 100,000 X 1.46431 = SGD 146,431

With HaaS
Invoice Amount: CNH 100,000
Based on Mar 2020 SGD/CNH: 1.34532
SGD payable in March 2020:
CNH 100,000 X 5.1960 = SGD 134,532

Without HaaS, Potential Loss Due to FX Movements: SGD 11,899

Based on the assumption that a SME in Singapore imports goods from China at an invoice value of CNH 100, 000 on October 2019, payable by March 2020.

Without HaaS
Invoice Amount: CNH 100,000
Based on Mar 2020 SGD/CNH: 1.46431
SGD payable in March 2020:
CNH 100,000 X 1.46431 = SGD 146,431

With HaaS
Invoice Amount: CNH 100,000
Based on Mar 2020 SGD/CNH: 1.34532
SGD payable in March 2020:
CNH 100,000 X 5.1960 = SGD 134,532

Without HaaS, Potential Loss Due to FX Movements: SGD 11,899

HISTORICAL CHART

SGDCNH 5-Month Performance

Based on the assumption that a SME in Singapore imports goods from China at an invoice value of CNH 100, 000 on October 2019, payable by March 2020.

Without HaaS
Invoice Amount: CNH 100,000
Based on Mar 2020 SGD/CNH: 4.8517
SGD payable in March 2020:
CNH 100,000 / 4.8517 = SGD 20,611.33

With HaaS
Invoice Amount: CNH 100,000
Based on Mar 2020 SGD/CNH: 5.1960
SGD payable in March 2020:
CNH 100,000 / 5.1960 = SGD 19,245.57

Without HaaS, potential loss due to FX movements: SGD 1,365.76 or 6.6% impact on profit margin

Based on the assumption that a SME in Singapore imports goods from China at an invoice value of CNH 100, 000 on October 2019, payable by March 2020.

Without HaaS
Invoice Amount: CNH 100,000
Based on Mar 2020 SGD/CNH: 4.8517
SGD payable in March 2020:
CNH 100,000 / 4.8517 = SGD 20,611.33

With HaaS
Invoice Amount: CNH 100,000
Based on Mar 2020 SGD/CNH: 5.1960
SGD payable in March 2020:
CNH 100,000 / 5.1960 = SGD 19,245.57

Without HaaS, potential loss due to FX movements: SGD 1,365.76 or 6.6% impact on profit margin

HOW IT WORKS

 

A Singapore-based company imports goods from USA to sell locally. With HaaS, Company A has decided to hedge against the devaluation of SGD against USD over 1.39 up to a notional amount of SGD100,000 for the next 3 months, at an affordable monthly payment of SGD100

 

ACCOUNTING TREATMENT

Hedging as a Service™ (HaaS)