Foreign exchange risk management
Date published:
Trading internationally can leave your business exposed to the risk of currency fluctuations. The measure of the risk depends on the currencies paid and received as well as the volume of your business tied to international markets and your future plans for growth.
Taking GBP/USD as a current example, at the beginning of 2022 the rate ran at 1.35 and on 16th September it was 1.15, this currency swing can potentially have a huge impact on the cost of your imports.
Did you know the Chamber can provide a foreign exchange currency audit though our partners Moneycorp, who are able to offer a currency health check that can provide a snapshot of your currency exposure, and can support in the development of a strategy for your business to mitigate that currency risk and cost in the future.
Moneycorp have resources to support with this including developing your currency risk hedging strategy.
Money market hedges allow companies to lock in the value of a foreign currency transaction when making a foreign exchange or transaction. This allows the domestic company to secure the value of its partner’s currency, albeit denominated in the currency used by the domestic company, in advance of the agreed transaction.
These hedges tend to be more complicated than forward contract, but they are ideal in situations where forward contracts are not easily available for a given currency (this can occur when a company is not big enough to obtain a forward current facility from its bank).
You may find that market money hedges are best suited to one-off transactions, due to the fact that they involve a greater number of distinct steps than forward contracts.
To find out more about Moneycorp’s services or as a member of the chamber you can arrange a free currency audit by contacting [email protected]