goods_and_service_procurement_practice_guide.doc

Complete the foreign exchange risk matrix to

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Complete the foreign exchange risk matrix to determine whether the exposure to foreign exchange risk is material. Should the exposure to foreign exchange risk be deemed significant or high, or you are uncertain of the approach to take, contact WATC at www.watc.wa.gov.au or on (08) 9235 9100. Foreign exchange risk matrix Although many products (and some services) originate from overseas, moving to a tailored procurement approach is only warranted where the foreign exchange risk to the transactions value is deemed material. To assist you with your preliminary risk assessment, the risk matrix below has been designed to categorise purchases into a foreign exchange risk rating of low, moderate, significant or high. 68 Ver. December 2017 Appendix
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If your assessment of the foreign exchange risk within your purchase is low, document this within your risk assessment and continue to use standard procurement template Request pricing in AUD. If your assessment of the foreign exchange risk within your purchase is moderate, document this within your risk assessment and continue to use standard procurement template Request pricing in AUD. Consider the term of the contract as this will increase the exposure to foreign exchange risk. If payment is due to occur later than one year following date of contract, this risk should be escalated to significant. Consider also, the size of the exposure relative to the public authority’s budget. If your assessment of the foreign exchange risk within your purchase is significant or high, or you are uncertain of the approach to take, contact WATC at www.watc.wa.gov.au or on (08) 9235 9100. Figure 1 Foreign exchange risk table Note if your purchase (regardless of value) will require payment in a foreign currency contact WATC at www.watc.wa.gov.au or on (08) 9235 9100. When foreign exchange risk is material Material exposure to foreign exchange risk will require greater pricing detail from respondents to ensure that the price paid by the public authority to transfer this risk to the supplier is fair. Where warranted, the public authority may consider allowing suppliers to quote in AUD and their preferred currency (dual pricing). WATC can advise on the necessary changes to Schedule 3 – Pricing, within the standard Request template. To achieve price certainty the public authority may need to implement a foreign exchange hedge (protection) with WATC. Access to foreign exchange products through WATC will require a Master Agreement to be established with the public authority if not existing prior. Protection of the public authority’s budget should be undertaken as soon as is practicable on advice from WATC. WATC can assist agencies to determine the appropriate approach and can provide support in developing a Request suited to the individual procurement situation and the ensuing financial evaluation process.
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