Brexit Foreign Exchange Risk: Top Tips for Businesses

The pound’s relationship with Brexit has been chaotic, to say the least. Devoid of trust, certainty and long-term security, it’s a reluctant bedfellow of this historic political event. While it’s no stranger to currency market movements, the risk of the pound fluctuating in value against its contemporaries has been heightened during such turbulent times.

The protracted Brexit process has been defined by political and economic uncertainty stemming from a stream of significant events: negotiations, parliamentary votes, elections, party leadership contests and resignations – significantly devaluing the pound and driving up the cost of making international payments. All of which brings the need to mitigate currency market risk into sharp focus for cross-border businesses.

Pound coinIf ever there was a time to be proactive rather than reactive when it comes to your currency strategy, it’s now. So, here are five top tips to help your business take control of its international payments, at a time when so much is out of your control.

Look beyond your bank

Many businesses are automatically drawn to their bank when making international payments, rather than taking the time to shop around for the best deal. Imagine you were buying business insurance or taking out a mortgage to purchase commercial premises, for example; you wouldn’t think twice about being more prudent. So why should such significant expenses like paying invoices to overseas suppliers or paying payroll in a foreign currency be any different? Shop around to find the best deal for the most cost-effective way of orchestrating your international payment. Money transfer provides, such as RationalFX, often provide more competitive rates than conventional banks.

Forecasting

Most businesses with currency exposure don’t have the time or resources to monitor exchange rates, let alone develop an in-depth understanding of their movements. Without a working knowledge of the vagaries of currency markets, the cost of your international payments will be left at the mercy of potentially inaccurate currency forecasts.

Rather than trying to predict the outcome of events that influence currency markets, it’s prudent to plan for all eventualities. For example, the result of several major political events – Scottish Referendum (2014), 2015 UK General Election, EU Referendum (2016), 2017 UK General Election – has caught both the public and currency markets by surprise in recent times, causing the pound to nosedive in value. Therefore, unless you have a crystal ball, it’s impossible to precisely predict which direction exchange rates will move, or by how much.

Hedging strategy

One thing currency markets can be certain of in the current political climate is Brexit-fuelled uncertainty. While this common theme has typically been a harbinger of doom and gloom for the pound, any hint of clarity can provide it with some much-needed relief – no matter how brief. For example, in early October the pound dropped to four week-lows against the euro and US dollar, amid reports of a breakdown in Brexit talks between UK and EU officials. Fast-forward just a few days and news that a deal had been agreed by both parties gave the pound a much-needed leg up, hitting a fresh five-month high.

This chain of events highlights the need to establish a proactive, forward-thinking currency strategy that protects your business’s international payment from exchange rate volatility – while providing scope to capitalise on any shred of positive news. For guidance around planning, implementing and managing a solution that safeguards your profit margins, talk to our team. You will be allocated a personal account manager who will take the time to understand your business’s requirements and help you establish a bespoke strategy.

Specialist exchange tools

Guidance will form the foundation of your hedging strategy, allowing you to make informed decisions around the timing of your transfers – but this alone won’t be enough. Your account manager will also explain the specialist tools that are designed to help your currency risk – from technical options to simple resources like a Forward Contract: this allows you to lock in a rate now for a transfer that happens up to two years in the future.

Monitor the pound’s performance

You might not be able to predict the outcome of the events that impact the pound’s performance or exactly how much it will shift in value, but you can keep abreast of its daily performance. To help do this, RationalFX can provide your business with a convenient daily currency update that go straight to your inbox each morning. These updates help provide an insight into the key event that have shaped the currency market, such as Brexit. By receiving these emails you will not only save your business valuable time, you can easily keep track of the pound’s value.

If you’d like more information about the services RationalFX provide or further details about how we can help manage your FX risk during and post-Brexit, get in contact with our currency experts:

Email: brexit@rationalFX.com
Call: 020 7220 8181
or sign up to create an account with us.

Read more Brexit articles

ITV Election Debate highlights

20th November 2019

Boris Johnson and Jeremy Corbyn locked horns in the first live televised leadership debate of the general election campaign! Here's everything you need to know... 

Commercial property and Brexit: key considerations for UK businesses with offices and infrastructure in the EU

23rd October 2019

As we prepare to say bon voyage, ciao and adios to the EU, newspaper columns have been choked with stories about UK businesses relocating to one of the remaining 27 member states – or even further afield.

Brexit Foreign Exchange Risk: Top Tips for Businesses

23rd October 2019

Here are top tips for managing your business’s foreign exchange requirements and international payments during and after Brexit…

Managing overseas suppliers: how to prepare for Brexit

18th October 2019

Managing suppliers after Brexit. Has your business considered how to maintain effective supplier relationships and management once the UK leaves the EU?

Breaking Brexit News!

17th October 2019

The UK and EU negotiating teams appeared to have reached an agreement before a meeting of European Leaders in Brussels.

Brexit Updates: 7th – 11th October

11th October 2019

During the week, there was doom and gloom surrounding the value of the pound because of various negative Brexit events. Find out more...

5 things you probably didn’t know about Brexit

10th October 2019

Did you know that Britain is not expected to pay off Brexit bill until 2064? Who is Ursula von der Leyen and why is she important? 5 facts you didn’t know about Brexit…

Brexit: the potential outcomes explained

10th October 2019

The potential Brexit outcomes explained; deal, no deal, delay or cancel. What will these Brexit outcomes mean for your business?

How will trade tariffs impact your business’s bottom line post-Brexit?

8th October 2019

Brexit will impact trade tariffs and tax duties on both imports and exports to and from the EU, affecting your business’s bottom line. Here’s what you need to know...

Brexit help – useful resources for businesses

8th October 2019

Here are some links to official government resources to help prepare your business for leaving the EU...

How to prepare for a No-Deal Brexit

7th October 2019

Originally posted on The London Group’s website as a guest blog, here’s how your business can prepare for a no-deal Brexit...

How a currency hedging strategy can help your business beat Brexit uncertainty

7th October 2019

It’s difficult  for businesses to predict how Brexit will impact the pound next. Here's how a currency hedging strategy will help your business eliminate FX risk...

2019 Brexit Timeline

7th October 2019

Our Brexit timeline highlights key events so far this year so far. 2019 has been an essential year for the Brexit movement. Each event in turn has had an impact on the currency market.

Why Forward Contracts are an effective way to manage Brexit currency risk

3rd October 2019

Brexit currency risk is a prime concern for many businesses that make international payments, whether it’s to a supplier, funding overseas office overheads or purchasing stock.