What is the NEER or the Net Effective Average Exchange Rate?

It is the Net Rate per Dollar either received against Exports or paid against Imports

Unknown Number – for most people

Many companies, including major ones, do not know their NEER readily. While financial metrics like Net Profit and EBITDA are at their fingertips, NEER goes unnoticed because it's not a standard request from management, boards, or regulators. Thus, it is not regularly calculated as an ongoing practice.

How is it calculated?

The calculation is rather simple, as shown below. We recommend calculating the NEER on a monthly and annual basis.

Understanding the NEER is critical because:

• It gauges the effectiveness of hedging strategies.
• Without NEER, one can track the volume of trades but will not know about the effective rates of my exports and imports and thus be unable to gauge hedging performance.
• Current performance can’t be compared against past results or other policies without NEER.
• Not knowing NEER hinders the ability to identify and implement necessary improvements.
• To enhance performance, one must calculate NEER.

The KSHITIJ Hedging Method recognises this necessity and calculates the NEER continuously to ensure strategic efficiency.





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