European Call Center Outsourcing | Managing Currency Risk
Posted on Fri, Jun 01, 2012 @ 04:48 AM
Doing business with European Call Center outsourcers can be a quick and cost effective way to acquire or maintain a European customer base, but it can create financial planning challenges when currency exchange rates fluctuate. Particularly with the current uncertainty surrounding the Euro, which is the currency for 17 out of the 27 members of the European Union.
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For example, if you have a budget of USD 1 million to spend in Europe for 2011 and the exchange rate at the start of the year is 0.75, then you might logically commit to spend EUR 750k with your European Call Center provider. Then as the year progresses, the exchange rate goes to 0.65, and then you realize that you are short EUR 100k, even though you have stuck to your USD 1m budget.
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The initial thought to resolve this is to get your European Call Center provider to commit to a US Dollar price, but this can pose challenges, as some suppliers will withdraw as they can only do business in local currency, and others may charge a price that is 10% to 20% higher in Dollars than the one they offer in Euro's.
The trick to getting the best deal, is to hedge your currency exposure at the start of the year and then offer your European Call Center provider to always pay in Euro's. In the example above, if you open a Euro currency bank account on 1st January 2011 and transfer USD 1 million into this account, you will have EUR 750k on deposit that will not be impacted by any subsequent currency fluctuations, and your budget is totally protected from currency risk. Or, if you do not want to tie up USD 1 million on deposit, most US banks offer currency hedging services at a cost of less than a quarter of one percent (0.0025%).
Thinking of outsourcing your European Call Center services? Then contact us to find our more.
Authored by John Drury, Sales Director at INTERACTION of Europe