Guard Your Business Against Currency Risk
With the world getting smaller every day and as technology makes it easier to forge relationships in far flung places, you’ve decided to venture into foreign markets. There is a whole world of partners, products and new markets out there that could take your business to the next level. With some pro-active planning and specialist advice, a business of any size can ride the ebbs and flows of volatility into international growth.
But international opportunity comes with its own set of challenges, especially currency market volatility. Cash flow is one of the biggest reasons why small businesses go under, and this risk increases in an environment where currency fluctuation can shrink profit margins and detract from your bottom line. Currency risk management helps to minimize the effects of foreign exchange on cash flow by developing a strategy based on the unique needs of an individual business.
Learn how to prepare a simple currency risk management strategy for your business.
Understand Your Exposures
No business can manage currency risk without understanding where currency exposures exist, and what it currently does to protect itself from volatility (if anything).Start by assessing your business goals, and how they are impacted by exposures. Speak to a range of people in your business to get different perspectives on what is and isn’t working. At this stage it can be beneficial to use a monitoring and analysis tool that evaluates your upcoming invoices against real-time exchange rates, to highlight where profits are exposed. Such a tool will also show the cost of these invoices in your local currency.
Manage Risk, Don’t Create It
The foreign exchange market and its management Key Takeaways: aren’t easily summed up in a few hundred words. These four steps are the nuts and bolts that can help you build a successful risk management strategy. The take away is that currency fluctuation does not have to be a cross to bear. The reality is that with some pro-active planning, and specialist advice, a business of any size can ride the ebbs and flows of volatility into international growth.