Exchange Rate Fluidity in Global Multi-Site Projects
In today’s global world, businesses are expanding more than ever and will continue to do so. Companies that used to operate in only one country now operate around the world. The single-region world we used to know has become more global and will continue to become so as communications and technology bridge the gap to allow customers and companies to work together in a more efficient and profitable manner. This has added financial challenges to our projects. This article looks specifically at how we can deal with the ever-changing exchange rates to ensure that our project business cases and costs are captured correctly.
This global expansion has introduced many challenges into the realm of projects, because it is more common that direct resources and suppliers are sourced across regions. As this has become the standard, the practices to finance these resources have not. The financial model is specifically what we will address in this article. Many of our project calculations (e.g., return on investment and internal rate of return) are based on the initial exchange rates during the business case development, and many models are reviewed only at project inception. This snapshot moment in time may not be represented through the course of our project, because exchange rates are fluid and constantly changing. We will go into more detail about this later in the article.
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