Corporate Clients

Why and how do companies use Halo Financial?

Managing currency risk

UK companies trading internationally face a number of risks to their business. Why do corporate clients need specialist currency guidance?

• The FX markets can appear complicated and even daunting for businesses trading internationally.
• Many Financial Directors assume their currency volumes are too small to spend any time on them.
• Companies often feel shut out of the opportunity – and protection – the FX market can bring
  because of fears about exposure to risk, not realising that doing nothing can be a bigger risk.
• This fear of being seen as speculating on FX can hold professionals back from using market tools to their company’s advantage when it comes to seizing international opportunities.
• No one wants to report bad news to the Board, so managing risk is essential.
• As with doctors, the first rule is “do no harm”
• Going it alone is risky – so our clients include specialist currency guidance in their team of trusted advisors

How to manage currency risk

There’s no escaping the fact that FX is a volatile market, which is why it can be such a significant risk to the business: but getting to grips with it is essential for good governance in international businesses. With the right tools in place, you can use uncertainty to your advantage, and mitigate the risks.

The key is protecting against the downside and ensuring there are no (bad) surprises!

Including a currency strategy in risk management plans

A robust plan, based on cash flow forecasts for as far ahead as possible, is the best place to start managing currency risk and building it into the wider business strategy.

Knowledge of incoming and outgoing foreign currencies will enable you to:

• Buy or sell at opportune moments
• Protect against the risk of adverse movements
• Swap currencies to improve liquid cash
• Set limits through automated orders, to ensure that currency risk is managed and profit securing opportunities are not missed

To make it work, clients need the right tools

There are a number of currency risk management tools and strategies available. The right foreign exchange tools can be used to identify potential issues before they occur and protect a client’s business from the harmful effects of volatile currency markets.

Foreign exchange tools and how they can be used to protect against currency risk

Spot trades

• Fix your FX rate on a specific day or over a couple of days
• Funds can be exchanged on immediate, “spot” transactions and the purchased funds held
• until an appropriate date in the future
• Requires a currency account

Market orders

• Can help you target a better exchange rate and protect you against a worsening one
• Helps companies use currency volatility to their advantage, gaining protection against currency losses and maximising on any currency gains
• Removes the burden of constantly monitoring the markets – safe in the knowledge that the market is working for you to achieve your target rate

Forward trades

• ‘Buy now, pay later’ trade
• An agreement to exchange a specific amount of one currency for another at a fixed exchange rate on an agreed date, for a planned payment, usually up to 12 months in the future
• A Forward offers certainty over what your profits will be

Contact us on +44 (0) 20 7350 5473 to find out how you can recommend corporate clients to us.