How to Manage Exchange

Rate Risk in Pricing

insights from

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Exchange rates have a huge impact on your pricing

strategy.

As rates shift, prices either become more profitable or

not profitable at all.

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This requires a HUGE strategy shift as markets become more

turbulent.

For example, the Euro has lost almost 25% of its value against

the US dollar, creating enormous risk and opportunity for many

companies.

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Need some inspiration foryour next strategy shift?

Here are two ways to manage exchange rates in a way that

doesn’t negatively impact margins.

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1. Establish a Price Fluctuation

Framework with Customers

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Constantly renegotiating deals is exhausting, and

neither side leaves happy.

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Instead of updating terms when exchange rates change, work with customers to build a framework to

address exchange rate fluctuations.

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A simple framework: Keep prices the same as long as the

exchange rate does not change by more than 10%.

Automatically recalibrate prices to split the difference between new and old prices when the price does move by

more than 10%.

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Have your analysts research worst and best-case scenarios and ensure the terms work for

both parties.

Make sure you cover your bases and close all potential

loopholes!

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Put everything on paper in terms customers understand, with

concrete examples and market-relevant terms.

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2. Create Value by Assuming the

Lion’s Share of the Short-Term Risk

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Absorb more risk, but makesure your customers are

willing to pay a premium for it.

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Lay out clear expectations for both parties to ensure

customers honor their side of the equation.

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Strategy Success Tip #1:Manage Internal Expectations

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Make sure your staff understands the strategies’

terms and goals.

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Strategy Success Tip #2:

Regularly Measure Price Performance

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We recommend isolatingyour data points

(exchange rates, volume, customer segments, etc.)

to see the true impact of your strategy on your profits. 

Measure regularly!

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Strategy Success Tip #3:

Keep a Close Eye on Exchange Rates

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Closely monitor exchange rates to enhance trend

assumptions and predictions.

Make incremental improvements to increase

profits over time.

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KiniMetrix helps companies leveragetheir sales transaction to buildprofitable pricing strategies.

Click here to see how KiniMetrix can do this for you.

Start turning exchange rate fluctuationsinto a positive impact on margins.