Category Archives: Sarah Davie, Foreign Exchange

TOP TEN TIPS – Reduce foreign exchange risk

For companies trading internationally, fluctuating exchange rates can be difficult to manage and hard to budget for. If the markets move against you it can erode or even eliminate profits and in a time of tighter margins and increasing raw materials costs, it is ever more important to protect yourself from exchange rate risk and make savings wherever possible.

Your business can take some proactive steps towards managing foreign exchange risk, whilst leaving the market analysis and interpretation to the experts.

1. Plan for risk

Planning is the first step to managing your FX risk. Agreeing on a budgeted exchange rate for the year will guide your transactions. Your budgeted rate should take into account the volume and timing of your expected transactions as well as a realistic assumption of current and future rates. A FX specialist can help to define this rate by analysing past trends. Planning ahead will help protect your business from foreign exchange risk and enable you to benefit from any exchange rate movements which are in your favour. This could make a huge difference to your bottom line.

2. Understand your business objectives

Your business objectives play an important role in defining a FX policy and it is important to know what degree of risk your company is willing to take and how much your FX exposure could impact on your business objectives.

3. Develop a foreign exchange policy and review it regularly

It is important that your policy complies with and works towards overall strategy and objectives. Once agreed, a policy should be reviewed regularly and be flexible enough to reflect the constantly changing nature of the markets.

4. Take information from a variety of sources

Information from varied market sources means a rounded view. Moneycorp dealers are MSTA (Members of the Society of Technical Analysts) qualified. As experienced dealers they will use their expertise to ensure your company receives the best information and guidance on the markets.

5. Choose a strategy that suits your requirements

With your policy in place it is time to review the FX tools that you can use to manage your exposure. Spot and Forward contracts and market orders can work individually or together to form a tailored foreign exchange strategy. Depending on your budgeted rate, your requirements and timing, your FX Dealer will be able to suggest a strategy to suit your business.

6. Get the timing right

Timing is key to managing FX risk. To take advantage of positive movements in the markets and to protect against negative fluctuations, you need to be informed at all times. Having access to a personal dealer who will proactively monitor the markets and inform you of relevant movements will enable you to make timely decisions on trades.

7. Don’t be tempted to gamble on the FX markets

While it’s tempting to take a punt on the markets, abandoning your FX policy can increase your risk. Extreme movements in the markets can catch you out. By speaking to your dealer and adjusting your strategy you can take advantage of positive movements without increasing the risk.

8. Investigate payment service options

Often, a foreign exchange transaction is just half of the task of managing international invoices. The time taken to process payments each month can add up and detract from other business activities. Your business could benefit from an online system, which simplifies payments, automatically checks banking details and stores details for future use.

9. Manage your business relationships

Tracking payments through the authorisation process is important in maintaining good supplier relationships. Look for payment tracking services, so your suppliers can be emailed automatically when a payment has been sent. In challenging times, key supplier relationships can be hugely important to your business.

10. Communicate and review

Reporting clarity enables your business to ensure it’s adhering to its foreign exchange policy and making the most of movements in the markets. It’s best to choose a system which will have access to sophisticated reporting tools, enabling you to keep track of deals, payments and the progress of your chosen strategy.

If you want to speak to a foreign exchange expert to discuss the specific requirements of your business, call Sarah Davie on 020 7828 7000 or email sarah.davie@moneycorp.com

Moneycorp Charity Event

moneycorp

Moneycorp With Eclipse Sports Promotions are hosting a charity networking event and auction for World Child Cancer on Wednesday 5th November.

It’s a great chance to meet the Moneycorp Team and our extensive network of clients and partners whilst raising money for a good cause.

There will be a selection of wines and a buffet, and our guest speaker for the evening is Graham Roberts, England international (6 caps)

Auction features a range of fantastic sporting memorabilia, the leading items up for auction are: a 1986 Mexico world cup shirt worn by Alvin Martin, Real Madrid’s Christiano Ronaldo signed and frames shirt and an England shirt worn by Paul Gascoigne in the 4-1 win over The Netherlands in the 1996 Euros.

Entry fee: £30 cash payable on the door

If you are interested please let me know – sarah.davie@moneycorp.com

Pound hurt by referendum uncertainty

The bookmakers still show Scotland as more likely to remain within the United Kingdom than to leave it next week but the odds have narrowed to 2/5. An opinion poll for yesterday’s Sunday Times put 47% of Scottish residents in favour of independence and 45% against. That result pulled the rug from under sterling this morning in the Far East.

The pound gapped lower, falling by a cent against the euro and cent and a half against the US dollar. Compared with Friday morning sterling is down by -0.7%. It is also lower across the board by an average of -1.6% on the week and -2.5% on the month.

The principal reason for the selling is that investors dislike uncertainty but there is also an argument that an independent Scotland would take with it most or all of North Sea oil production. That would mean a bigger UK trade deficit. A relocation of Scotland’s finance industry south of the border would arguably not be enough to make up the gap. However, the main reason for sterling’s decline is the uncertainty.

 

Sarah Davie

Sarah.davie@moneycorp.com