How should ruble-exposed Finance and Treasury respond to Russia’s economic rollercoaster?

With the Russian economy heavily entwined with crude oil, Natasha Lala of OANDA Solutions for Business explores how corporate treasurers open to the ruble can best manage the recent ups and downs.

The Russian ruble currently finds itself on somewhat of a funfair ride. The currency is tightly paired with oil - crude oil to be specific - as it is the largest exporter globally. When the oil price was high, the country rode the market with joy. However in more recent times oil has hit record lows, with the value of the ruble tanking alongside it. In fact, the ruble hit an all-time low in January in line with the oil price plummet.

Due to the fact that the ruble is so closely linked to the price of oil, any major event can send its value up or down. For example, last month Russia experienced a period of recovery as President Putin announced the withdrawal of the bulk of its armed forces from Syria. The surprise announcement sent the ruble upwards as investors believed the decision would soothe fragile relations with the West. However, the ruble soon came hurtling back to the ground as the price of oil fell. This is example is typical of the sort of geopolitical factors that have made the ruble so volatile over the past year. In light of the fact that Russia’s currency is subject to such peaks and troughs, how should a corporate treasurer exposed to the ruble manage their risk?

Firstly, with Russia’s economic situation in mind, a treasurer must ensure that they have automated data feeds for FX rates. Automated data feeds and exchange rates can reduce the risk associated with fluctuations caused by any shock political event as it provides more accurate prices. Coupled with this, a treasurer should also look to acquire a broader range of prices rather than just one bank rate. With a widespread pool of data, a treasurer is more likely to spot future trends that affect the value of the currency he/she is exposed to.

Ultimately, a treasurer exposed to the ruble must ensure that they are doing the most they can with the data they possess; specifically information on geopolitical events affecting the price of oil, and the countries that it is economically aligned with. Unexpected price spikes can be extremely costly to a business, so a treasurer must ensure that they are fully strapped in and prepared for any unexpected loop-the-loops.