Technology has enabled businesses to become increasingly global, with companies now accessing talent and trading internationally regardless of size. However, today’s economic climate exposes multinational companies to the risk of unexpected currency fluctuations that can erode profit.
We’ve seen unprecedented volatility in the last year, largely due to the unexpected Brexit vote. Until Article 50 is triggered, market uncertainty is inevitable, which can make planning and forecasting more challenging.
Alongside the risk surrounding president Donald Trump’s policies, it is expected that the US central bank will raise interest rates up to three times this year. Interest rates have always been a key driver of foreign exchange (FX) movements.
Most UK corporates do not have sufficient internal resource to create and implement a successful FX risk management policy. However, if you or your customers have an international supply chain, this is a consideration that needs to be prioritised.
Whilst a UK business may prefer to trade in Pounds, foreign suppliers or clients may request to make a payment or be paid in their local currency. These transactions will involve conversion and are therefore exposed to FX volatility. In either scenario, entrepreneurs should consult a foreign exchange expert, as banks tend to deny certain services to companies which do not meet their turnover threshold.
Joseph Stevens, Senior Currency Consultant at Global Reach Partners
Global Reach Partners is one of the UK’s leading foreign exchange experts, offering a wide range of products and services to global businesses. Authorised by the Financial Conduct Authority, they act as an outsourced treasury function to provide a streamlined approach to international trading and risk management. This is simply an alternative to traditional banking provisions.