Mark Horgan, CEO of moneycorp said:
“Uncertainty is bad for business and investment, and the prolonged period of uncertainty that lies ahead will therefore be bad for the pound. Sterling’s fall today will be concerning for many businesses – not least those importing SMEs who are already operating on tight margins. Many of our customers were engaged in hedging discussions pre the announcement, some are now 1.5% better off as a result. When you are operating on single figure margins this is significant. Those importing SME's who did not hedge are now 1.5% worse off.
“With this period of uncertainty set to continue, small businesses should be looking to minimise the impact of future exchange rate movements wherever possible. There are some steps SMEs can take immediately to get to grips with currency risk:
- Plan for risk. Planning ahead is a critical first step. It will help to protect your business from foreign exchange risk, and enable you to moderate the impact of exchange rate movements, avoiding nasty surprises. This could make a big difference to your bottom line.
- Get to know the currency markets. Currencies around the world are affected by different factors – from supply and demand, to economic growth, interest rates and politics. Understanding the currency market you’re entering will help you to develop the right strategy to manage risk.
- Talk to a specialist. A foreign exchange specialist can help you to hedge against currency risks. A forward contract, for example, allows you to agree an exchange rate in advance, so you know exactly what rate you’ll be trading on the day you make a transfer. Locking-in an exchange rate is beneficial as it manages the risk you are exposed to and allows you to trade within the margins you are most comfortable with.
- Supply quotes in the local currency. Take into account all the associated costs of trading internationally and supply a quote in the local currency, making it easier for the customer to work towards their internal budgets.