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Implementing a robust strategy to manage currency fluctuations, especially with the triggering of Article 50 imminent, is of utmost importance when considering trading internationally, a foreign exchange (FX) expert told business leaders at an event in Swansea yesterday (Thursday 16 March).

Paul Langley
Paul Langley

Paul Langley, managing director of OSTCFX, was speaking at an importing and exporting seminar held at Swansea’s Liberty Stadium, supported by the Welsh Government. In addition to Langley, industry specialists from Business Wales, UK Export Finance, Gerald Thomas Accountants and NatWest spoke of overcoming obstacles when considering business expansion to overseas markets in light of the UK government’s plan to trigger Article 50, which formally notifies Britain’s intention to leave the European Union (EU).

Langley highlighted important factors relating to managing currency risk, emphasising the need to be proactive in implementing a robust FX hedging policy and to plan for all outcomes.

“Many businesses looking to expand by trading internationally have been reluctant to do so since the Brexit vote. Currency markets have been volatile as a result of the uncertainty we’ve been faced with since the June 2016 referendum and the lack of clarity around the UK’s future trading relationship with the EU. This volatility has been a deterrent to those looking to expand to overseas markets as large moves in FX markets could hurt a company’s bottom line,” said Langley.

The most recent political battles in Westminster and their resultant impact on the British pound were also addressed by Langley, showing that the time is now for businesses to take action when it comes to FX.

“Sterling has again come under significant pressure in recent weeks following the Lords asking for amendments to the government’s Brexit bill and the fact that Article 50 could be triggered any day now. Yet an amazing 80 percent of SMEs haven’t hedged since Brexit or amended their hedging policy in any way, which is actually quite frightening.

“So many businesses are simply sitting on their hands and waiting to see what happens. Business leaders need to take control now to help create more certainty for their organisations during these turbulent times. Being prepared and planning appropriately should be a priority, not ignored,” he added.

Major national and international companies, including EasyJet, Apple and Sports Direct, were outlined during the seminar as examples of organisations that have been hit hard by the impact of currency volatility. Whether it be a fall in the pound, a strengthening dollar or increasing import costs, millions have been lost by these well-established companies as a result of a poor approach to FX management.

Langley advised that with a strong FX strategy, businesses can limit the risk of such losses: “Currency exchange may sound complicated but it can’t be ignored and it can be managed. This is possible through making foreign exchange a fixed cost to your business, hedging as far forward as you can and limiting your potential liabilities to numbers you are comfortable with,” he concluded.

Wales-based OSTCFX looks to form long-term, transparent relationships with companies where any margins or fees it earns are fully disclosed, making it a disruptive player in this often opaque sector. It also offers a free audit to companies where it will assess historic FX transactions and demonstrate any savings that could have been made.

Since OSTCFX was formed in 2012, it has saved its Welsh clients in excess of £750,000 versus their previous FX provider and processed more than £500 million of transactions.