Long-Term Contracts
Common for construction, consulting, project-based work
Your Situation: Multi-year contracts in foreign currency with uncertain cash flow timing. Can't hedge it all upfront.
The Challenge: Project milestones shift. Hedging too much creates cash flow mismatches. Hedging too little leaves you exposed.
Our Strategy: Tenor-based layering with decreasing coverage over time. Reflects decreasing forecast accuracy.
Example Rules:
- Year 1: 100% coverage (high confidence in timing)
- Year 2: 70% coverage (moderate confidence)
- Year 3+: 50% coverage (low confidence, more optionality)
- Adjust coverage as milestones are confirmed or delayed
- Use longer tenors (12-24 months) for distant exposures