You may have a clear understanding of the rates you’ve been paying for your international currency transactions. But would you know whether you’ve been getting good value for money or paying considerably more than needed? All in all, it could be costing your business a lot of unnecessary expense.
If your business is involved with cross-border currency transactions, it’s inevitable that you will be exposed to exchange rate fluctuations, just like these cases.
This can be a risky business. To which degree, however, will be largely dependent upon the level and type of currency being transacted and the frequency with which you have exposure to international markets. Taking everything into consideration, this can have quite a bearing on the success, or otherwise, of your business, especially where margins may already be tight.
Shining a light on FX risk
To know exactly how well prepared you are in terms of currency exposure and to remove any uncertainty, a simple solution is at hand - engaging the services of a dedicated FX provider. In the long run, it could save you a substantial amount of money.
Appointing a team of currency experts will help provide clarity on your current levels of FX risk – now and going forward. If you didn’t know what it was until now, you certainly will do from this point onward! This type of service would not be available through your typical mainstream bank.
How would this currency health check work?
A thorough currency audit will include a breakdown of your company’s currency exposure, transaction costs and key findings.
The report will provide:
- an overview of currency fluctuations against the pound, for any markets with which your business comes into contact.
- estimated costs and potential savings relating to future international payments.
Using a breakdown of historic transactional data from your business, say for each quarter during the last 12-month period (and further back if necessary), the audit will be able to compare the exchange rate paid on each payment against what could have been available.
This analysis will take into account the use of various products, including both spot contracts and forward contracts. From this, it will be possible to gauge what you could have saved. Depending on your current level of spend – this might come up as something of a shock.
An audit such as this would provide an invaluable insight into any shortcomings that may be present with your current methodology. From there, it would be possible to devise a more tailored approach to your company’s foreign currency transactions, involving a suitable degree of hedging, with the aim of creating an FX strategy better suited to your business requirements.
Developing a currency strategy to mitigate risk and minimise cost
If it becomes clear that your current FX exposure is having a detrimental effect on your business, it could be time to re-evaluate your current strategy - one that mitigates risk and removes unnecessary costs, thereby reducing risk and helping retain a healthier profit margin.
If you are not sure whether your business is spending more on its international currency transactions than needs be, we can arrange a free, no obligation currency audit report. MFX are the Isle of Man’s only dedicated FX brokerage partnered with a world leading FX specialist. Leave it to us to point you in the right direction.
To arrange an appointment, either call MFX directly on 01624 694722 or email david.shimmin@mfx.im.
MFX Ltd is a wholly owned subsidiary of the AIM-listed Manx Financial Group and a sister company of Conister Bank and Edgewater Associates.