Asia PacificRisk Management Limited provides tailored advice on financial risk, hedging solutions and corporate treasury management to the following organisations in New Zealand, Australia and Asia:

• Public-listed, state-owned and privately owned companies that have financial risk exposures arising from their business activities:-
  • Importers
    
  • Exporters
    
  • Borrowers
    
  • Commodity buyers/sellers
    
• Finance companies and building societies that have financial risk exposures on liquidity, funding and interest rate movements.
  
• Fixed Interest Investment funds/portfolios or organisations who themselves invest directly into approved debt securities.
  
• Government and Regional/Local Government bodies on debt raising/refinancing and interest rate risk management on debt and invested funds.
  

Asia-Pacific Risk Management Limited conducts its retained and one-off advisory assignment under formalised engagement/mandate letters with its clients that detail:-

• Scope, objectives and deliverables of the advisory project and retained relationship
• Timetable and assigned staff
  
• Advisory Fees - fixed amounts with agreed payment dates
  
• Confidentiality undertakings from both parties.
  
  

Exporter's foreign exchange hedging policies have been severely tested over the past six months as the NZD/USD exchange rate soars to 22 years highs of 0.7800. In hindsight, it is very apparent that the vast majority of exporters did not increase hedging percentages when the NZD depreciated to 0.6000 12 months ago. Most remained at minimum percentages of hedging policy limits as the consensus view at that time was that the Kiwi was heading lower to 0.5500!

The subsequent NZD reversal to above 0.7000 again has caught many exporters badly, with business profitability, financial viability and fundamental survival in NZ all seriously threatened to various degrees. A salutary lesson of why hedging policies should be followed and why FX risk management should not be over-reliant on currency forecasts. Exporters in USD have been hit the hardest with tales of woe coming through the financial media on a daily basis.

The sad and unfortunate reality of the damage the “high interest rate/high exchange rate” policy setting has done to manufacturing in New Zealand is that none of the businesses that have been forced offshore will ever return manufacturing to NZ. Extreme NZD currency over-valuation is not always the sole reason behind the decision to re-locate manufacturing offshore, but it has been cited in most cases.

A selection of the recently reported cases of New Zealand exporting jobs offshore instead of manufactured product are:-

• Fisher & Paykel Appliances: East Tamaki washer and dryer manufacturing plant closed and relocated to Thailand (labour costs, competitors costs, duties and taxation also key reasons)
• Dynamic Controls: Christchurch plant closed
• Skellerup: only dairy industry rubber product manufacturing to remain in NZ, rest to China
• Click Clack: cannot compete, relocating to China
• 3M: Auckland manufacturing plant closed down
• South Pacific Tyres: plant being closed
• Colgate Palmolive: plant being closed
• G L Bowron: Leather and sheepskin processing relocated offshore
• Allied Pine – Wanganui Sawmill (owned by Allied Farmers): mill closed with loss of 56 jobs
• Gale Pacific – Christchurch textile manufacturing operation closing with the loss of 100 jobs
• Cedenco Foods - closing Hawkes Bay frozen food processing plant. Loss of 120 seasonal jobs

Added on to this list should be the hundreds of jobs that have disappeared offshore in the seafood processing industry in recent years, as well as potential upcoming redundancies and plant closures as PPCS and Alliance meat exporters talk merger and rationalisation in the South Island. Current employment figures do not yet reflect these job reductions, but inevitably they will.