Exchange Rate Fluctuation & Protecting Your Business

Exchange Rate Fluctuation & Protecting Your Business

If you've been in business for a few years now - or have kept an eye on the currency rates - you'll know that exchange rate fluctuation is a very typical thing.

Realistically speaking, almost anything can impact how much bang for your buck you get when you're converting ££ to $$ (or any other currency type). Political climates, core country infrastructure, even natural disasters and some innovations can shift the value of a nation's currency.

Recent years have been a key example of this, as the global economy has faced incredible challenges. And if you conduct a fair amount of business overseas, it probably means this fluctuation has disproportionately affected your company.

All sounding familiar to you? Read on to discover how you can better protect your business and steady your finances.


Currency is like a wave in the ocean

Currency rates and value naturally rise and fall throughout any given time, and it's usually nothing to worry about. Supply and demand is at the core of any fluctuation because most major currencies are bought and sold on a flexible exchange rate within the global market; the higher the demand, the higher the value could be.

There are a vast number of reasons a nation's currency could shift and modern history has provided a few real-life examples. Germany's hyperinflation in the early 1920s is perhaps one of the most extreme. When it hit its peak in 1923, exchange rates were around 4.2 trillion marks to one US dollar. Everyday people wallpapered their homes with the banknotes as a means to keep warm.

While that may be a severe example, it's worth noting that the US dollar dropped overnight after the result of the 2016 election, though not as severely as many economists had predicted. And of course, the British pound sterling has seen some rocky periods since Brexit and the resulting negotiations. 

While it may seem like an obvious history lesson, businesses can learn a huge amount by observing patterns across the global economy and individual countries' economies - particularly how to take the necessary precautions.


As the saying goes…

You might not be able to control what happens around you, but you can control how you react to it.

If you're a business founder, owner or a member of the managerial team, you'll know better than anyone that learning, evolving and adapting is the only way to protect your business, and ensure its success for years to come.

So how can you do just that when it comes to exchange rates? Here's a few places you might want to start.


Fixed Contracts

We've touched on this before, but if you're doing business with a partner overseas, you might want to consider how establishing a fixed contract - and therefore a fixed currency amount - could help create consistency in your pipeline. Of course, it's likely that you will need to re-examine this on an annual basis, but it's certainly a direction many SMEs and sole traders are taking.


Hiring an FX Specialist

Potentially a worthwhile investment for your business is to seek the help of an FX specialist. An FX specialist will monitor the global economy for you 24 hours a day, and report any key findings or observations. They might not be able to act on your behalf, but equipped with the right information, your business could take any preventative or supporting action as a result.


Take Forecasting Seriously

And not just sales or growth forecasting. Examine the global market regularly and critically, and determine how this could impact exchange rates for the period ahead, and therefore your business' bottom line. If this feels out of your remit, it could be worth speaking with an FCA-accredited advisor about a potential partnership.


Benefit From Fixed Exchange Rates

Fixed exchanges - FX - rates could be a game-changer for your business' overseas payments and your bottom line. Safenetpay offers competitive FX rates for business account holders to make your international payments simple, safe and efficient.

Ultimately, exchange rate fluctuations - or any global market uncertainty, for that matter - can be extremely daunting for many businesses, particularly if you're an SME or only just starting out. But it's far from doom and gloom. Play your cards right and you can ensure you're riding the wave, rather than crashing down with it.

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