Your Currency Strategy
Companies that trade internationally or have offices overseas are exposed to foreign exchange (FX) risks that arise from fluctuation in the currency markets.
Any currency can experience periods of high volatility, making attempts to predict the foreign exchange markets a gamble that affects profitability.
From eCommerce to imports, a growing number of businesses are understandably keen to exploit overseas revenue opportunities. However, profits will suffer if you do not plan and successfully take control of your foreign exchange exposure.
Control Exposure and Protect Your Profits
There are many ways that foreign exchange exposure can diminish profitability, including:
- International trade contracts that may be settled at a later date
- Unexpected currency fluctuations
- Overseas payments for your imports
- Multinational currencies
With an ever-changing financial landscape, the risks are undeniable. Managing those risks and controlling your foreign exchange exposure equates to protection of profits and the ability to budget and forecast.
Assessing and understanding your foreign exchange exposure is a good place to start. This involves numerous factors, such as: the currencies involved, the impact an adverse rate would have on profitability and the timing of payments (to name a few).
foreign exchange strategies that help combat the risks are:
- Spot rates
Spot rates allow you to take instant advantage of market movements. A rate is agreed and can be settled that day, or over the coming days depending on your requirement.
- Buying Forward
Buying forward provides the confidence to ‘lock-in’ a rate and subsequently control your level of risk. This strategy can be deployed for a week, a year, or sometimes longer, and provides a level of security to your business.
- Market Orders
Market orders are a clever strategy that allow you to set a target rate, which once reached in global foreign exchange markets, is executed and the trade then live. With foreign exchange markets almost always open, this method allows you to execute trade at any time, in any currency and stay inside strict budgets.
Understanding and assessing the risks to your business and taking control of your foreign exchange exposure can be laborious. Your strategy may involve some or all of these methods and should be flexible, proactive and designed around you.
Poorly managed foreign exchange will have a detrimental impact on profit margins, cash flows, costed levels and external pricing.
Protect your profits and take control of your foreign exchange exposure with an expert strategy designed around your needs.
Central FX are here to help you do just that. With an ever-changing financial landscape, your dedicated FX specialist will work with you to understand your business, develop your risk mitigation strategy, implement any necessary changes and protect your profits.
Get in touch with one of our dedicated FX specialists to find out how we can help protect your bottom line.
Central FX is authorised by the Financial Conduct Authority (FCA) under the payment services regulation 2017. Our FCA registration number is: 565847.