With currency markets in flux, it’s important to put a foreign exchange strategy in place – with the right advice and broker
For a while exporters could overlook currency issues. The market was quiet and small fluctuations could be ignored. Then bang – the eurozone wobbled, the Swiss de-pegged the franc, and the US Federal Reserve and the Bank of England started hinting at interest rises.
The last year has been a bit of a roller-coaster. UK businesses purchasing in US dollars will be paying 6 per cent more while those buying from the eurozone will be 13 per cent better off. Some of the swings have been so fast that an exporter with a ten-week sale-to-payment cycle could have seen their entire profits wiped out in that time-frame.
The message is clear. All companies exposed to currencies need a foreign exchange (FX) strategy.
The problem is that it’s not always clear where to go. High street banks rarely offer the best rates. And few of the power-house investment banks are set up to truly support the small and medium-sized enterprises (SMEs) that are the engine room of the UK economy. When it comes to FX, few SMEs feel the banking sector really works for them.
What international companies need is a friendly, easy-to-understand and experienced partner to manage currency risk. Here is where World First comes in. It was founded in 2004 by two friends, Jonathan Quin and Nick Robinson, to create a fair, genuinely customer-first model for clients.
There’s no secret to its pricing model; it’s simply that the margins taken by World First are smaller than banks, so it can offer a better rate. And for most deals, there are no fees. Graham Stanton, UK managing director of World First, says: “Some brokers use ‘honeymoon rates’ to win business and gradually increase the spread over time. At World First we believe in fair and transparent pricing, and will be happy to explain all costs to you on every transfer.”
The customer service is superlative. Mr Stanton explains: “You’ll get a dedicated dealer who will take the time to understand your business and your call will always be answered within three rings by someone smart, friendly and helpful – we don’t believe in making people speak to machines. But once you’re up and running, you can make transfer after transfer under your own steam using our online dealing platform, one of our apps and, if you prefer, our Android watch app.”
The approach is sophisticated, yet clear, and covers everything from straightforward spot trades to made-to-measure currency options. The Structuring Desk will create bespoke products that take into account all parameters, such as the length of the hedge, the characteristics of the currency, the risk profile of the client and balance sheet requirements. Hedging can vary from straightforward options to protect a rate, to advanced packages designed with the potential to beat forward rates.
Exchange rates can move quickly, often unpredictably, and could make a huge difference to your bottom line
All currencies are covered. World First presently transacts 127 currencies from the Australian dollar to the Zambian kwacha.
This approach has built World First into the market leader for currencies. It has grown into a global business with offices in London, Singapore, Hong Kong, Sydney, Washington and Texas. It’s set a number of firsts, such as the unofficial world record for the fastest international transfer of 6 minutes 49 seconds and the first international payment from a wearable device.
World First has rock-solid credibility. The chairman is Sir David Clementi, who served as deputy governor of the Bank of England between 1997 and 2002. Sir David joined World First as a senior adviser in 2006.
The currency markets show no sign of settling down. An FX strategy is a requirement for all companies trading overseas. Mr Stanton concludes: “If you have exposure to currency markets, then you are advised to put a strategy in place to manage your risk actively – it’s important to that you feel in control. Exchange rates can move quickly, often unpredictably, and could make a huge difference to your bottom line.”
For more information visit WorldFirst.com or call 020 7801 1057