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Nine tips to manage corporate foreign exchange and international payments

Pangea FX Limited

Whether your business is small or large, if you trade internationally, the ever-volatile currency markets can be both difficult to manage and tricky to budget for.

Market movements out of your company’s favour can chip away at profits and even make you suffer losses.

In a time where industries are becoming further saturated, profit margins are being squeezed and the cost of raw materials is always rising it is imperative to put in place procedures to best manage your FX risk.

1 Be Proactive & Plan for Risk

Last year GBP/USD and EUR/GBP had an over 10% difference between their year high and low.

It is all too easy to adopt the mentality of ‘I’ll just book it on the day and get whatever rate I get’, but that can quite simply be very damaging to your bottom line.

Agreeing on a budgeted exchange rate for the year will help when placing your trades, this should be done in consultation with an FX specialist and take into account volume and timing of your expected requirements, the current rate(s) and an educated assumption on future rates.

By being proactive it will both protect you from adverse market conditions but also allow you to take advantage of favourable FX movements and increase profit!

2 Establish your Objectives & Risk Appetite

Understanding how much FX exposure could affect your business is crucial when beginning to define your FX policy and will be a leading factor in deciding on your risk appetite.

3 Develop a policy and DON’T be Tempted to Gamble

After developing a policy which aligns with your business objectives and strategies, make sure to stick to it.

It is all too tempting to take a punt on the markets, but this can leave you open to unnecessary risk.

By communicating effectively with your FX Dealer, you can take advantage of positive movements without being left exposed.

4 Get to know the Products

To effectively execute your policy, speak to your FX Dealer about the FX tools you have to hand.

They will tell you how Spot, Forwards and Market Orders work, and which combination will be most effective to achieve your goals.

5 Get Transparent Pricing

Agree a fixed spread (margin) with your provider and only use companies who publish the mid-market rate (where they buy).

This means you can always know where you’re buying when you look at websites such at netdania.com.

It also means no silver-tongued broker can pull the wool over your eyes when he catches you on the golf course!

6 Timing Timing Timing

Arguably the most crucial element to effective execution of your FX policy.

In order to take full advantage of positive movements and protect against negative fluctuations, it is imperative to have strong line of communication between yourself and your personal FX Dealer.

They can communicate upcoming events and trends to adjust your strategy as and where applicable.

7 Save time – Go Online?

Executing the trade is only half the task of managing international payments.

The processing time of payments can certainly add up and take your focus away from running other areas of the business.

Use a provider who can offer you access to an online platform to manage and store beneficiaries and payments and one that has an automatic IBAN checker.

8 Maintain Business Relationships

Tracking online payments through an online payment tracker is a great way to stay in the know and maintain good business relationships with your suppliers.

9 Review

The currency markets are constantly evolving and that’s why its important that you’re flexible enough to mirror that with changes to your FX policy.

To effectively review your policy be sure to use a company that gives maximum reporting clarity. Using a system that gives you access to sophisticated reporting tools and enabling you to track deals, payments and beneficiaries is integral to that.

If you’d like to speak further about you’re FX and build a plan together, please get in touch.

Joe Jones, Director of Pangea FX T: 020 3940 6973 E: joe.jones@pangeafx.co.uk