Currency Devaluation affects the businesses in some way or other. Some get direct impact some get indirect impact. News has a lot of articles reporting about the devaluation of currencies of different countries. Some show currency fluctuation on periodic basis. Very common question comes, does it affect the businesses in any way. The answer is yes ! Not only businesses, everyone’s life is also affected by this in some way or other.
Let us analyze this impact in business!
Direct Impact: Many businesses get direct hit in case of appreciation or devaluation of currency. This may come in many ways. However, there can be three main ways.
Indirect Impact: Many businesses might not get a direct impact, but
gets a hit in indirect way. This is a most common impact
Cost: Many industries
require fuel to perform. Most of the countries a major part of the fuel comes
up from abroad. This is import based item. So currency fluctuation has some
major role in this. If the currency appreciates, the fuel import will cost less
for the country, leading to low fuel price. This reduce the operating expenses
for the for the company. Other the other hand if the currency is devalued, fuel
cost will be high for the country, leading to high fuel price. This is increase
the operating expenses for the country.
Transport Cost: Almost every industry require transport in someway or other. This is directly related to the fuel cost, which in turn depends on currency values. Currency devaluation causes higher fuel price and in turn increasing the transport costs for business units and vice versa.
So, most of the businesses will be affected by the currency fluctuation in someway or other. Impact will be either direct or indirect. So it is important for businesses to strategize themselves for such changes.