Non-Deliverable Balance Sheet Hedging: Protect Your Global Assets
In today’s global economy, businesses with international operations face significant currency risks.
Non-Deliverable Balance Sheet Hedging offers a robust solution to protect your company’s financial position from exchange rate fluctuations, especially when dealing with restricted or non-convertible currencies.
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What is Non-Deliverable Balance Sheet Hedging?
This financial strategy uses Non-Deliverable Forwards (NDFs) to manage foreign exchange risk for companies with assets or liabilities in currencies that can’t be freely traded.
It shields your balance sheets from currency volatility without physically exchanging the underlying currencies.
This hedging technique allows your company to:
- Enhance predictability in foreign currency exposures
- Safeguard overseas asset values
- Stabilise financial reporting
How It Works
Non-Deliverable Forwards (NDFs) Explained
NDFs are financial contracts where parties agree on an exchange rate for a future date without delivering the currencies involved.
The difference between the agreed rate and the prevailing market rate at maturity is settled in a major currency, typically US dollars.
Balance Sheet Application
For balance sheet hedging, NDFs offset the currency risk of assets and liabilities denominated in restricted currencies. This approach is particularly effective for companies operating in emerging markets or dealing with currencies subject to capital controls.
Settlement
At contract maturity, the difference between the NDF rate and the actual exchange rate is calculated and settled in the agreed currency, neutralising the impact of currency movements on your balance sheet.
Benefits of Non-Deliverable Balance Sheet Hedging
Currency Restriction Management
Protect your financial position even when dealing with currencies that can’t be freely traded or moved offshore. It’s an essential tool for businesses expanding into markets with complex regulatory environments.
FX Volatility Impact Reduction
Offset potential losses from currency fluctuations, smoothing out the impact of exchange rate changes on your company’s financial statements.
Financial Reporting Stability
More predictable foreign currency exposures allow for clearer, more consistent financial reports. This stability enhances investor confidence and simplifies financial planning.
Who Needs This Service?
- Multinational corporations with operations across multiple countries
- Companies with significant investments or operations in developing economies
- Firms dealing with currencies subject to capital controls or limited convertibility
Our Non-Deliverable Balance Sheet Hedging Service
Bespoke Strategies
Via our partners we create custom hedging solutions aligned with your company’s risk profile, financial goals, and specific currency exposures. Our experts analyse your balance sheet to design a strategy offering optimal protection.
Wide Currency Coverage
Our extensive network provides hedging solutions for numerous currency pairs, including those not typically available in traditional markets.
Comprehensive Risk Assessment
Our financial specialists conduct thorough risk assessments to identify potential vulnerabilities in your balance sheet, designing hedging strategies to address these specific risks.
How we can help
We offer tailored payment processes via our partners, designed to leverage risk management expertise and competitive exchange rates.
Whether working directly or through your SPV, you have the flexibility to cover any portion of your currency exposure through forward contracts.
Hedging solutions provide the option to layer forward contracts, allowing you to effectively manage your exposure in line with your risk appetite.
Bridging Finance London is well-equipped to assist in setting up these strategies, ensuring that your business is protected against currency fluctuations.
