De-Risking Your Next Production

Every Producer has a different tolerance for risk. In the production of film and television projects, some types of risk are unavoidable, but many are manageable. With the success of past projects, many producers build a production process which is repeatable and consistent.  However, with the cost of production continuing to rise, and revenues continue to be under pressure, the game has changed, and your existing processes may not be relevant anymore. 

To understand your individual risk appetite lets review the below scenario.

Producers, would you...

1.) Give your production staff a blank check to pick out and buy you a car?

2.) Would you ask them to drive that uninsured car to your house, park in on the street and leave the keys in it?

While you undoubtedly have intelligent hardworking production staff, neither you, nor they would be comfortable with the above scenario. Unfortunately, many productions are currently duplicating this scenario at an even greater risk to the production.

If you are a US or Canadian Producer, in most cases you are either sending or receiving foreign currency and changes in the exchange rate can cost you thousands of dollars. If you are involved with international co-productions outside of North America, transacting in a variety of foreign currencies, your risk exposure can be even more complex.

In building a budget for an upcoming project, production staff will choose a currency conversion value or “budget rate” that will be the basis for budgeting your next project. Do not get me wrong, your accounting staff may be dedicated and smart, however many fail to understand the complexity and volatility of the currency exchange market. For example, the value of the USD has changed multiple times since you started reading this article. By the time you go to camera your budget may no longer be based in reality. Without research into historical, economic and geopolitical data, a budget rate set by production staff is guesswork. Are you comfortable basing your production to guesswork?

As you see from the above chart. USD has depreciated over the last 11 months to multi year lows. The consistent downward trend of the US dollar has placed productions who have set budget rates in USD, but not taken steps to protect these rates, in the unenviable position of reworking their budget with a reduction in funds. While these funds existed a month ago during the planning of this project, they have disappeared in a falling market, leaving a significant funding gap to the production.

Currency risk is a common issue for most productions (large and small), but this risk can be reduced or in many cases eliminated with proper planning, experience, and knowledge. In addition, if done correctly, this can be accomplished without adding additional cost or time to your production. Your production staff will be supported in setting and updating achievable budget rates.

Three Steps to De-Risk your Next Production

Step 1: Set an Achievable Budget Rate

Everyone understands that timelines associated to production planning is a mixed bag. You can do everything correctly, only to have your production timelines pushed for reasons outside of your control. You may ask: “If the currency market is always moving and I can’t control my timelines, how can I set an achievable budget rate?”

Looking at the market and using the day rate as your budget rate is the first mistake. It will only be achievable for a few minutes after you close your browser.

Things to consider:

• Is the currency tracking upwards or downwards?
• Potential currency influencers; Jobs reports, Federal Interest rate announcements, Oil Prices and Geopolitical pressures.

Tip: There is no cost to have an expert work with your staff to set an achievable budget rate.

Step 2: Set and Re-Set Your Achievable Budget Rate

The key to a successful budget rate is to start achievable, followed by tracking the market to systematically update your budget to reflect market changes. Bringing in a third party to track and notify your staff when a material change has occurred will eliminate surprises.

Tip: There is no cost to have an expert track your rates and inform you of material changes.

Step 3: Green Light Means Lock It In

You are holding a signed contract and shoot dates are confirmed. Because your budget rate has been tracking the market there will be no surprises or financial shortfalls. Now is the time to lock in your budget rate. Some Producers may want to lock-in the entire budget, while others will lock-in a portion of the budget and track the market for opportunities to lock-in a higher amount. This strategy does not always pay off as there is no guarantee the market will go higher during production.

Tip: There is no cost to have an expert work with you to develop a strategy that fits your specific scenario to get the best balance of risk and opportunity.

 Partnership

Allowing E2E and our partners to work with your staff, you can better manage your production’s currency risk – at no cost. We will protect your production’s financial future by ensuring your rates are fixed and timed according to you schedule.

Tip: It is impossible to go back in time and correct a budgetary shortfall caused by a poor decision by someone who is not fully versed in the film industry and currency hedging,

E2E will work with you to ensure your production is protected against currency risk without any impact to your production budget. Through our established rate providers, we guarantee the overall best rate, establish a strong production budget, and monitor fluctuations to identify opportunities to improve your position – all at not cost to you.

This is the E2E white glove promise.

To Schedule a Call:

Jason Davies-Vice President, Sales & Partnerships

Cell/Text 604-618-0913 [email protected]

www.e2emediagroup.com

 Jason Davies Bio:

Prior to joining the End2End Media Group, Jason was the Vice President of Film Finance and FX Risk Management at EncoreFX. In addition, Jason previously held senior positions with TD Bank, First Data, Moneris and JP Morgan Chase. Jason was also responsible for developing the Film Desk at Western Union. Combining his numerous, warm relationships with clients and his 25 years of experience in film and international payments, Jason brings incomparable value to Canadian and international film producers. He understands the unique challenges and hurdles of the film industry.