Symposium background

The Asia-Pacific Economic Cooperation (APEC) SME Crisis Management Center organised the APEC Symposium on Enhancing SME Capacity of Managing the Risks Associated with Trade Liberalization that was held on 16-17 August 2011 in Taipei. Over five hundred people from around the APEC region attended the symposium.

This two day symposium was intended to familiarize participants with the risks SMEs might face when engaging in international trade and provide the knowledge to manage these risks with a focus on exchange rate risk. The symposium also helped APEC SME officials to formulate policies to address SME needs in coping with fiercer foreign competition resulting from trade liberalization. In addition, this symposium aimed to pinpoint key risk management principles that would be used to guide APEC SMEs in their ongoing risk management implementation.

The symposium served as a cornerstone project for the APEC SME Crisis Management Center's working program for 2011.

John R. Rush invited to be Symposium speaker

Oakbridge Principal Consultant, John R. Rush, was invited to make two addresses to the Taipei symposium. In making his addresses, Rush drew upon some thirty years experience as a foreign exchange risk management advisor in Australia, New Zaland, South East Asia and India. He was able to offer a unique perspective of a financial markets practitioner who has also been a central bank research economist and the deputy corporate treasurer of a company that was at the time amongst Australia's top fifteen largest listed companies and Australia's largest gold exporter and second largest coal exporter.

Brief summaries of Rush's two symposium presentations follow in the two columns to the right.

Post conference

Following the conference, Rush's contribution was recognised by his being invited by the conference organisers to contribute an article to the SME Crisis Management Center monthly publication Economic Crisis Monitor. Rush's invited article, Beware of Purchasers Who Offer Favours, was published in Economic Crisis Monitor No 15 October 2011. That article is linked to the Oakbridge Web site Publications page.

Speaker question and answer session following individual presentations (John Rush on extreme left)

There is a body of long-standing economic theory that purports to offer insights into spot exchange rate movements over time. In the context of the highly interdependent, electronically connected, global world of foreign exchange dealing, this presentation commented on (i) the realistic financial markets influences that move spot exchange rates and (ii) the worth of exchange rate forecasting.

Implications of the inadequacies of orthodox economic theory as the basis for exchange rate forecasting were drawn to suggest an appropriate attitude towards risk for those SMEs with commercial business entailing exchange rate risks.

Trade Liberalization and the Associated Risks Faced by Domestic SMEs

Entry into new trade markets occasioned by trade liberalization may well increase foreign exchange risks. The uncertainty thereby engendered can be significantly mitigated, if not eliminated, if a well-defined foreign exchange risk management policy is constructed and implemented. The application of sound commercial negotiating tactics to reduce foreign exchange risk, combined with a technical understanding of the financial markets instruments available as risk management tools, allows the SME to control foreign exchange risks and concentrate on core commercial business.

Exchange rate risks can be controlled - but it takes a will to do so and ongoing oversight of risky positions.