Globalisation and technology mean more companies than ever are doing business in overseas markets. As a result, making and receiving payments in multiple currencies has become a normal feature of business life. But, along with the benefits that accessing overseas markets brings, there are challenges too. One of the most problematic of these can be currency risk. Which is why CurrencyFair has created an in-depth guide containing strategies to help agencies working in overseas markets to tackle currency risk.
Get to grips with the basics of FX volatility
Understanding currency risk
The first step to mitigating currency risk is understanding what causes it. The value of currencies rise and fall over time. So while a favourable movement can cut the costs of doing business in an overseas market, a movement in the other direction can make it more expensive. This is where the risk arises. If the value of your local currency falls against the value of the currency of the overseas market, then you're going to need more of it when paying for outsourced services in that territory.
No one can predict with complete accuracy how currencies will behave, but there are things you can do to manage the threats - especially with the help of The CurrencyFair Quick Guide To Mitigating Currency Risk When Outsourcing.
Understanding the mechanisms behind currency volatility, for instance, can help you make informed decisions when it comes to mitigating risk. In this guide we explore the factors behind volatility and what to look out for.
Safeguard your overseas business interests
In 2020, many SMEs experienced losses as a result of swings in the currency markets. This guide has been developed to help reduce the threats posed to your business by currency fluctuations.
Protecting your business from currency risk starts with knowing where your vulnerabilities lie, so the guide starts out by highlighting the importance of analysing your business model - how and where you operate - to assess the problems that could occur. After that, you can identify the best resources for information on currency pairings relevant to your business and put a plan in place to help mitigate currency risk.
Not every business has the resources to create a hedging team to manage risk, but there are some basic strategies you can apply when setting up contracts that can help safeguard your business against potentially negative swings in currency pairings, such as forward contracts and currency options. In our guide, we explain how to do this and the best ways of integrating these tools into your dealings with overseas suppliers.
Managing currency risk is critical when it comes to budgeting and it's not something you can ignore. Improve your chances of success by downloading The CurrencyFair Quick Guide to Mitigating Currency Risk When Outsourcing and find out what steps you can take to help reduce your exposure to volatility in an uncertain global marketplace.
Do you know when your business is more sensitive to currency risk?
