FX Volatility: The bottom line – A guide by Western Union Business Solutions

Posted on 4 Sep 2020 by The Manufacturer

From politics to international trade tensions, recent economic turbulence has highlighted one thing more clearly than ever: businesses trading internationally need risk management strategies in place to protect profits from currency volatility.

With currency rates fluctuating in this uncertain market, volatility is a real threat to any international business transaction. A 5% profit margin is hard earned but can be quickly lost with an unfortunate turn in exchange rates.

Working to develop strategies to ensure budgeted levels can be set and protected may be a priority so you may want to speak to a qualified risk management consultant to consider the following steps:

Understand your exposures: Start by assessing your goals, risk appetite, and tolerance to volatility. Is there a budgeted level which is used for accounting purposes?

Consider, for example, credit needs and payment requirements such as cost of transfers, bulk payments, or international routing.

Create a strategy: Identify some goals specific to managing currency risk. These could include defining a target exchange rate for some or all your exposure.

Consider establishing a formal risk management policy to define processes.  Select the right risk management tools for your business remembering that one size does not fit all.

Tactics and execution: For a lot of businesses, the strongest strategies often recognise a framework for executing trades at favourable levels while protecting against material risks.

It may also be important to review the market and identify recent trading patterns to understand the risks and opportunities available.

Evaluate and adapt your strategy: Monitor your strategy and consider adapting it to identify shortfalls and build on success. Use a platform which can provide thorough and detailed information and data to assist your decision making.

As a provider of cross-currency, cross border payments around the world, Western Union Business Solutions (WUBS) recognises that for a lot of our clients, foreign exchange volatility should be limited as a risk factor.

WUBS can offer products which match your strategic currency objectives depending on the needs of your business. We also offer competitive spot rates, optimal routing, and cost-effective transfers.

Our globally leading online platform facilitates online payments, bulk uploads and can also give real time access to positions and mark to market valuations.

If you would like to discuss further please call 0207 539 6911 or email [email protected]

Services in the UK are provided by Western Union International Bank GmbH, UK Branch and Custom House Financial (UK) Limited (which does business under the trade name of Western Union Business Solutions.  Western Union International Bank GmbH, UK Branch (WUIB) (Branch Address: 131 Finsbury Pavement, London, EC2A 1NT) is a branch of Western Union International Bank GmbH (registered in Austria, company number FN256184t, VAT Number ATU61347377, with its registered office at The Icon Vienna (Turm 24), Wiedner Gürtel 13, 1100 Vienna, Austria), which is licensed by the Austria Financial Market Authority (Finanzmarktaufsicht).  Custom House Financial (UK) Limited (registered in England, Company Number 04380026, Registered Office Address: 200 Hammersmith Road, London W6 7DL) is authorised by the Financial Conduct Authority under the Payment Services Regulations 2017 (Register Reference: 517165) for the provision of payment services and is registered as a Money Service Business with HM Revenue & Customs (Registered No: 12140130).