Every month we publish a "feature of the month" where we ask one of our consultants to highlight a feature in MILAS AX (our specific ERP modules for Microsoft Dynamics AX). This month Tim De Ryck shares his insights.

Hedging in the commodity trade

In a business as international as the commodity industry currency hedging is a company critical process. To eliminate the foreign exchange risk MILAS AX users rely on our in-house developed currency hedging add-on for Microsoft Dynamics AX.

When buying or selling goods in a foreign currency, international organisations are exposed to financial risks. If the value of their base currency decreases in relation to the foreign currency before the transaction date. They could also benefit from a possible increase... Most companies however prefer to eliminate this huge risk altogether and sign hedging contracts with their bank.

Hedging in Microsoft Dynamics AX

As an experienced industry partner, Adifo has optimised Dynamics AX to accompany the hedging process from within your ERP.

At the creation of a foreign currency contract, MILAS AX uses the exchange rate that’s valid on that day and will update this with the rate at the transaction date. These exchange rates can be automatically imported from an external source but can also be entered manually. The trader sends a request to the accounting department to buy a certain amount of a foreign currency; or MILAS AX can be setup to send this request automatically. At this point the accounting department decides what to do with the hedging request: they can confirm the request and enter the hedging contract details with their bank or they can ignore this request and keep using the daily exchange rates. Of course a combination of both options is also possible. This way the trader can leave the decision wether or not to hedge the contract to the financial department. They are better informed to decide if they want to accept the foreign exchange risk or if they want to transfer the risk to their bank by signing a hedge contract.

No matter what your company policy about foreign exchange risks is, MILAS AX can support you and your company with our currency hedging add-on.