Managing Currency Risk During Uncertain Times

The pound remains under pressure against the euro and the US dollar amidst a deterioration in market sentiment, confirming that global matters are taking a firmer hold of the currency’s prospects.

For those that are exposed to the US dollar, it continues to benefit heavily during times of uncertainty thanks to its ‘safe-haven’ status. We have seen a seven per cent decline against the dollar in the last two months.

UK inflation has come down steadily over the past couple of months, but did cool off earlier this month, raising further questions on whether the Bank of England should consider raising rates at its next policy meeting in November.

However, the Bank of England governor has all but confirmed that interest rates will not rise in November, adding further pressure on the pound.

Bank of England Governor Bailey’s comments will likely add downside pressure to the pound, which has fallen against both the euro and the US dollar this week, on top of disappointing retail sales figures.

UK retail sales fell by a percent in September, and on top of this, the GFK consumer confidence survey showed that consumer confidence plunged in October by 14 points.

It all feels a little gloomy for those that are exposed to euros and US dollars, falling to six-month lows in the blink of an eye!

The same cannot be said if you are selling euros and dollars.

If you are a manufacturer, importer or exporter of global products or services, then here are four steps to manage your currency risk.

1. REGULARLY REVIEW YOUR OPERATING CYCLE: By regularly reviewing your business operating cycle you will begin to understand where FX risk exists. This will help you determine your profit margins sensitivity to currency fluctuations.

2. EVERY COMPANY HAS DIFERENT REQUIREMENTS IN FX: Every business is unique and will manage their currency requirements in a way that suits the company. It is key to understand that currency fluctuations could have an impact and the decision to hedge or not is not that simple. Some companies prefer to simply ‘spot buy’ as and when they have a currency requirement, albeit riskier during times of uncertainty.

3. DECIDE WHAT RULES YOU WANT TO APPLY TO YOUR FX RISK & STICK WITH IT: Having a clear understanding of the company’s financial objectives and the potential effect the changes in FX rates might have are key in managing your FX risk. Monitoring your FX risk ensures that whatever the financial objectives are, such FX risks that could jeopardise those objectives are monitored and mitigated.

4. MANAGE YOUR EXPOSURE TO CURRENCY RISK: Hedging can help mitigate the uncertainty caused within financial markets. Hedging protects company profits and can act as a safety net to protect against a declining market.

Dealing with a currency broker has never been easier and they can help you manage your currency risk by understanding your currency position & budget requirements. They can help build up a plan to provide you with a solution to managing your currency risk professionally and effectively, allowing you to focus on what you are there for.

If you are using a provider or bank, why not request a comparison. During these times of uncertainty, saving money is paramount.

Moving currency can be a complex procedure, but with the right partners it does not have to be. An FX broker can help take away the burden of trading and monitoring rates, and manage the process on your behalf, ensuring that you take advantage of the market at the right time.

Information supplied by UK FX Holdings Ltd. If you have any questions, please contact Kris Charalambides (Head of Corporate FX) on 0207 183 7928 or email: kris@imsfx.co.uk

In conversation with Donna Schultz

Donna Schultz, Commercial Director for sales and membership, has been a familiar face with the Chamber for four years.

When asked who she would invite to her dream dinner party, she had a very special reason for wanting to invite a former England footballer.

Tell us about your time at the Chamber.

I used to work in the environmental health sector for a long time, but really there are only so many risk assessments you can do before you lose interest. I’ve lived in Hertfordshire most of my life and I took the opportunity to be able to represent the county, doing something interesting. The past four years have been challenging, but with everyone’s support, the Chamber has grown.

What has been your proudest moment?

Getting my promotion and becoming a director. That was a big milestone for me personally. It gave me more of a voice.

Do you have a favourite event?

I love the Summer Party at Sopwell House. It is always so well put together and very relaxing. I love the Inspiring Herts Awards, but there is a lot going on. At the Summer Party there isn’t the same pressure. It’s an opportunity to celebrate at a great venue.

When you are away from the office, what do you enjoy doing?

I have two children so there isn’t much me time. I’m very sociable so I do enjoy going out for dinner and catching up with friends. The Hermitage is one of my favourite restaurants, although I do enjoy a good curry as well. And whatever I choose to eat, it would have to be accompanied by wine or gin, definitely not vodka.

If you could have a dinner party with three guests, dead or alive, who would you invite?

My Grandpa, Don Welsh, who died in 1990. That’s who I am named after. He was a professional footballer and played for England, as well as managing Liverpool. He was hilarious and had so many stories. I’d also invite Simon Cowell because I love sarcastic and funny people and I think he would be entertaining. And the Queen. She was simply inspirational. And I would love to hear what really went on behind the scenes.

Tell us about the best holiday you’ve ever had.

When I was 22, I went backpacking for 10 months to Australia, Fiji, New Zealand and America. It really made me grow up. I went with a friend but she chose to stay in Australia so I continued by myself. Hawaii was my favourite place and I would go back. Las Vegas was great as well – a really bizarre place with no clocks or windows to keep everyone inside gambling.

And, finally, tell us something people may not know about you.

I did a skydive over the Game of Thrones region while I was backpacking in New Zealand. I get motion sickness and I’m afraid of heights so goodness knows why I did it. In the plane I felt a bit unwell and when I landed, I was sick. It’s the scariest thing I’ve ever done.

In conversation with Alison White

How long have you been at the Chamber?

I have only just recently returned, but I had been with the Chamber for more than five years previously. I am delighted to be back working on the great variety of events that provide so much support for our members.

In my role, I oversee everything from the Inspiring Herts awards, the various conferences and lunches, as well as the numerous networking breakfasts and events like the summer garden party.

I love bringing these events to life and knowing that they are going to be interesting, useful and also educational for our members.

Do you have a favourite event?

I do enjoy the conferences, especially the Women in Leadership one. I was responsible for introducing that one when I saw how popular the Women in Leadership lunches were, and it has a special place in my heart. It’s great in the way everyone supports each other. We all appreciate the challenges women face and offer moral support as well as business advice. It’s a very inspiring and empowering event. When you are away from the office, what do you enjoy doing?

I love family life and walking my dog Django, who is a very laid back, big, black Lab. This may sound odd, but I like to collect rubbish on our walks! Litter is a big bugbear of mine so each weekend I take a picker and a bag with me to tidy up the local countryside. I call myself the bag lady!

If you could have a dinner party with three guests, dead or alive, who would you invite?

I’d love to invite people who interest me and be able to talk to them face to face. So, I think my guest list would be Frida Kahlo, Dave Gilmour from Pink Floyd and Anne Boleyn. And we’d all sit together and chat over one of my favourite bottles of red wine – a Malbec or a Cabernet Sauvignon from the New World.

Tell us about the best holiday you’ve ever had.

That would be the one to Sri Lanka 29 years ago when I got married. We just disappeared and didn’t tell anyone our plans. Everyone thought we were just going on holiday. It was an amazing trip…it’s the most beautiful place with lovely, humble people. We went back again for our 10th anniversary and it was just as beautiful.

And, finally, tell us something people may not know about you.

I enjoy flower arranging and have completed an official floristry course. I’ve taken commissions for friends and acquaintances - when I’ve had time between events.