Published Wednesday 23rd October 2019

From overseas suppliers to international markets, if your business has connections abroad then it will be exposed to the risk of currency fluctuations. The value of the pound has been particularly volatile of late due to the uncertainty around the outcome of Brexit and other circumstances including the US-China trade war. For example, in the first three months of the year, the GBP/euro rate fluctuated between 1.11 (1st January) and 1.17 (12th March). From peak to trough that marks a difference of around 5%. This could be either positive or negative for a business depending on the location and volume of both imports, exports and salary costs in the UK and Europe. Either way, it means that British businesses cannot be certain of their costs or revenue if it is linked to the value of the pound.

Until the outcome of Brexit becomes clear and either a departure deal is reached or no-deal becomes inevitable, businesses are left in limbo and so are the financial markets. Brexit isn’t the only issue; while it may seem like the UK isn’t directly involved in the US-China trade war, it has had a knock-on effect on currency values, which fluctuate in relation to each other. The situation has impacted trade across the world; in addition to Brexit uncertainty, British businesses may soon be facing a very different global commercial landscape and currency volatility adds another layer of risk to a challenging situation.

Foreign exchange rates are constantly fluctuating; currency values are susceptible to factors from macroeconomics to geopolitics and could move in either direction at any time. The risk may be compounded by the full impact of international transactions on the bottom line; from poor exchange rates and high transaction fees to the administrative resource required to manage multi-currency finances. A foreign exchange strategy can help a business address the risk of currency fluctuations and the support of a currency specialist may streamline the process and reduce costs.

“At ERA, with some pro-active planning from our banking & payment specialists, we can help businesses achieve more than just great rates and help lower fees. There are a range of specialist tools available to track, target and even fix exchange rates for a set period of time. There are also tools to manage international payments from an online platform, cutting administrative time. Our currency specialists work closely with businesses to understand how currency risk can impact a business and help to develop an FX strategy in line with their company goals.” Associate Director, Harvinder Rattan.

About the Author: Harvinder Rattan, is an energetic business leader with more than 20 years’ experience in finance and business transformation. His excellent people skills allow him to quickly and easily engage stakeholders in order to win hearts and minds to drive effective change.

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