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Why does my business need FX risk management?
6 August 2019
Content Marketing Executive
It’s a problem many UK businesses face—what will happen to the pound after Brexit? What impact does the US-China trade war have on trade and currency values? These are big issues that you have little control over, yet their effect on market movements fundamentally affects your business.
Even though you can’t control market movements, this doesn’t mean you have to accept it. With Ebury’s help, there are ways to manage currency fluctuations.
An example many businesses face...
You know you’ll be buying £100,000 worth of supplies from Europe within the next few months, you’ve checked the currency exchange rate and have planned for the extra expense. However, when the time comes to actually exchange currencies, the rate has gone down and you have to pay out more money than initially expected.
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What do you do?
As exchange rates fluctuate constantly—sometimes by two or three percent in a day—you need to lock in a rate. This can be done by purchasing a Forward Contract. This means you agree to exchange a certain amount at a certain date in the future, meaning you can avoid any future negative market movements. Even with unpredictable events affecting FX rates, such as Brexit and the US-China trade war, you can protect your margins.
While it’s true you won’t gain anything if you lock in a rate and the market moves in your favour, it does prevent you from losing money in the long run. Choosing between
saving money or
spending more is an easy decision to make. Even if you're not sure when you would need to convert your currency, you can purchase an Open Window Forward contract, which allows you to drawdown any amount, as many times as you want within a given time frame.
What to do today:
Speak with one of our currency specialists—we are often cheaper than high street banks and we get to know your business to find the foreign exchange solution that works best for you and your company. If you’re interested in what we can do for you,
or reach out to your Relationship Manager.
To keep up to date with market movements,
to our weekly market updates.