FX volatility | The bottom line, a guide by Western Union Business Solutions

David Harvey our consultant managing the role

From Brexit to international trade tensions, recent economic turbulence has highlighted one thing more clearly than ever: risk management strategies have to be in place to protect profits for businesses trading internationally. If you are an FD or fund manager; many hours of expertise are poured into choosing the right opportunities and tracking yields, but if there is an international element to the investment, even a small change in the currency exchange rate can have a significant effect on profit or the value of returns.

With currency rates fluctuating up to five percent in a month last year, volatility is a real threat to any international business transaction. Five percent profit or gains in an investment are hard earned, and can be quickly lost with an unfortunate turn in the exchange rates. The uncertainty exacerbated by Brexit has caused hesitancy to purchase currency with a “wait and see” approach; dealing all FX on spot with their incumbent banking provider. But large swings in rates means that currency volatility and pricing have become higher on the agenda for many; highlighting the need to get the best from a reputable provider. Working to develop strategies based on the unique needs of a business or the requirements of each fund means budgeted levels can be set and protected. If you are trading internationally, you may want to speak to a qualified risk management consultant to consider the following steps:

Understand your exposures
Businesses could struggle to manage currency risk without understanding where exposures exist and reviewing what they currently do to protect themselves from volatility. Start by assessing your goals, risk appetite, and tolerance to volatility. Is there a budgeted level which is used for accounting purposes? Consider, for example, credit needs and payment requirements such as cost of transfers, bulk payments or international routing.

Create a strategy
With an understanding of your objectives, you have the power to start making informed decisions. Identify some goals specific to managing currency risk. These could include defining a target exchange rate for some, or all your exposure. Consider establishing a formal risk management policy to define processes. Select the right risk management tools for your business remembering that one size does not fit all.

Tactics and execution
Once the most appropriate tools have been selected, applying the right trading tactics can mean the difference between success and failure. For a lot of businesses, the strongest strategies often recognise a framework for executing trades at favourable levels while protecting against material risks. It may also be important to review the market and identify recent trading patterns to understand the risks and opportunities available.

Evaluate and adapt your strategy
Just because a policy has been in place for a long time does not necessarily mean it is still relevant in the current market conditions. Monitor your strategy and consider adapting it to identify shortfalls and build on success. Use a platform which can provide thorough and detailed reporting to assist your decision making.

As a provider of cross-currency, cross border payments around the world, Western Union Business Solutions (WUBS) recognises that for a lot of our clients, foreign exchange volatility should be limited as a risk factor. WUBS can offer products which match your strategic currency objectives depending on the needs of your business. In addition, we offer competitive spot rates, optimal routing and cost effective transfers. Our globally leading online platform not only facilitates online payments and bulk upload but can also give real time access to positions and mark to market valuations.

Our 10th edition of our highly regarded Market Insight Report represents the views of over 1,100 professionals, and contains insights from our specialist consultants and key business partners on market and employment trends.

If you’re looking to find out more on salary benchmarking and the motivations driving the modern workforce today, download our full report which contains key contributions from Seddons Solicitors, Women in Fund Finance, Intoo UK & Ireland and Breaking the Silence.

16/09/19
posts

Related articles

Summary: Senior Managers and Certification Regime Rules 2018/19
Summary: Senior Managers and Certification Regime Rules 2018/19

** DEFAULT postresults.teaserlabel - en-GB **

Governance

** DEFAULT postresults.contenttypelabel - en-GB **

General

23/07/18

** DEFAULT postresults.summarylabel - en-GB **

Marks Sattin's Compliance and Financial Crime Recruitment Manager, recently put together a summary of the FCA near final Senior Managers & Certification Regime rules published on the 4th July 2018. This extensive document is over 400 pages long and describes the key areas of change to be implemented over the next year and a half, with the deadline being 9 December 2019.  The key areas of change: Senior Managers Regime The Senior Managers functions remain the same for the FCA only (not PRA), with the exception of: • SMF18 (Other Overall Responsibility) • SMF7 (Group Entity Senior Manager) • SMF27 (Partner) The functions have been further clarified in their handbook. Certification Regime The FCA have not made any further amendments to the Significant Harm Functions for the FCA, only authorised firms. “Opt up” to an Enhanced Firm Because of the large number of holding groups who have multiple legal entities and companies, the FCA have introduced a process for them to “opt up” on a voluntary basis to become an Enhanced Firm. Even though individually they do not meet the criteria for being an Enhanced Firm, this change will give them the opportunity to be recognised as one. A new FCA Register Currently the register only contains information on Senior Managers and no information on Certified Persons under the Certification Regime. Download the full summary here.

** DEFAULT postresults.teaserlabel - en-GB **

A summary of the FCA near final Senior Managers & Certification Regime rules published on the 4th July 2018.

Read full article
Nicholas Georgiou

by

Nicholas Georgiou

Nicholas Georgiou

by

Nicholas Georgiou

Financial services to be targeted with cyber crime?
Financial services to be targeted with cyber crime?

** DEFAULT postresults.teaserlabel - en-GB **

Financial Services

** DEFAULT postresults.contenttypelabel - en-GB **

General

11/04/16

** DEFAULT postresults.summarylabel - en-GB **

The UK has been abuzz with concern over cyber crime over recent months, with warnings from several different sources indicating that the country's businesses may not be taking the threat as seriously as it warrants. Security expert Dr Sally Leivesley is the latest to add her voice to this chorus, telling ITV's Daybreak presenters that the UK's status as a financial services hub makes it particularly vulnerable to attack. She argued that Britain has became "an open business sign" for opportunist hackers because of the potential profits to be made from damaging its wide-ranging network of banks, investment companies and other financial institutions. A spokesman from the Home Office emphasised that the government is taking action to limit online criminal activity and warned that businesses must not become complacent about the threat posed by  this kind of disruption. Home Affairs Committee Chair, MP Keith Vaz, said: "We need to establish a state of the art espionage response centre. At the moment the law enforcement response to e-criminals is fractured and half of it is not even being put into the new National Crime Agency." What does this mean for financial services businesses? While one hopes the government's investment will be fruitful, it's obvious that companies should not rely on it as their sole bulwark against cyber crime. Just 21 per cent of the FTSE 350 company secretaries questioned in a recent Financial Times/ICSA Boardroom Bellwether survey felt they had identified their key information assets and taken action to mitigate the risk these face - this will need to change in the future. Although in the past cyber crime was an area largely confined to the small group of technical experts charged with setting up security systems, in the current climate it needs to become a boardroom issue, as well as one that is emphasised throughout an organisation. Spreading knowledge of the risks throughout a company can help stop mistakes from happening and gaps from being left in safety procedures. http://www.itv.com/news/story/2013-07-30/uk-losing-war-against-e-crimes/ http://www.ft.com/cms/s/0/b41a861a-e166-11e2-b796-00144feabdc0.html#axzz2aWJsSJJ9

** DEFAULT postresults.teaserlabel - en-GB **

The UK has been abuzz with concern over cyber crime over recent months, with warnings from several different sources indicating that the country's businesses may not be taking the threat as seriously as it warrants.

Read full article
Nicholas Georgiou

by

Nicholas Georgiou

Nicholas Georgiou

by

Nicholas Georgiou

Staying ahead of the game - safeguarding for the future
Staying ahead of the game - safeguarding for the future

** DEFAULT postresults.teaserlabel - en-GB **

Financial Services

** DEFAULT postresults.contenttypelabel - en-GB **

General

16/10/20

** DEFAULT postresults.summarylabel - en-GB **

Looking forward to the end of the year, it is unfortunate to state that the Covid crisis is still a huge part of our lives, and with this comes the expanding impact on the global economy. True, a few sectors have done well under lockdown conditions but they have been the exception. It has been suggested that by the time this crisis is over, it could, through the destruction of the economy, cause much more harm to the financial system than the 2007 financial crisis, with talk of a V-shape recovery becoming muted. The future is somewhat unknown, and with no vaccine, the virus will continue to change the world we know.The financial sectorOne particular sector which has weathered the storm is banks and other financial intermediaries. They did this by being quick to react and adjust to the new business environment. An environment that requires more attention to liquidity management, conducting business over a long distance, and offering more time and support to their clients. However, the real test will come when the debt moratorium ends. Banks will need to have a clear picture of the outlook of their clients and their new risk profile. " Brexit in the backgroundThere is also no forgetting Brexit, rearing its head in the background of the pandemic. While we wait for a negotiated deal, the outlook is still concerning, as things will not be the same for most businesses moving forward. A new normal and a new kind of relationship with the EU requires a full-scale reassessment of risk. Banks and other financial intermediaries will need to upgrade their risk management systems, just like they did post the 2007 financial crisis. Like before, banks that stay ahead of the game will emerge as clear winners. Safeguarding for the futureRisk - when the ceiling has been lowered on the revenue front, it makes sense for banks to focus their attention on risk, and to put in more efforts to minimise foreseeable loss. Among other things, banks will want to recalibrate their credit risk models, taking into account the varied impact of Covid on all the economic sectors.Credit quality - financial institutions will need to reassess the credit quality of their clients after they emerge from the crisis; paying particular attention to those in sectors that had been more exposed to the fall out. New data and assumptions will have to be incorporated into the model in order to determine EBITDA, free cash flow and costs.Technology - This will, of course, play an important role in risk management. Banks will employ new technologies to help manage operational risk, credit risk as well as market risk. If the 2007 crisis is any indication of things to come, a lot of hard work will have to be put into the management of credit and operational risks, employing new technologies to monitor banking operations, review data and reconfigure risk models.Talent insightFor now and for a long time to come, talented risk managers and professionals are what banks will continually need - people with the right set of skills and experience. Unfortunately, the talent pool of risk managers has not been expanding in line with the new demand.Over the past decade as regulatory demands were on the rise, becoming increasingly more complex, no meaningful efforts were made to attract more talented people into the field of risk management. This has led to a shortage of skilled risk managers even before the emergence of the pandemic. Given the urgency of our current climate banks will not have the time to train people and will need to recruit. This is where we come in, if you're a professional within risk, please get in touch now.

** DEFAULT postresults.teaserlabel - en-GB **

It has been suggested that by the time this crisis is over, it could, through the destruction of the economy, cause much more harm to the financial system than the 2007 financial crisis

Read full article
Deem NaPattaloong

by

Deem NaPattaloong

Deem NaPattaloong

by

Deem NaPattaloong

jobs

Related jobs

Commodities Market Risk Analyst - Brussels

Salary:

€49,699 - €67,771 per annum + + Help With Relocation + Bonus + Benefits

Location:

Brussels

Market

Financial Services

Job Discipline

Risk

Industry

Energy, Resources and Industrial

Salary

£60,000 - £70,000

Qualification

None specified

Contract Type:

Permanent

** DEFAULT listwidget.vacancypartial.description - en-GB **

We are working with a global commodities firm who are looking to bring on board a Market Risk Analyst to join the Gas & Power team in Brussels (the business will help you with relocation)!

** DEFAULT listwidget.vacancypartial.reference - en-GB **

MRB920_1600961236

** DEFAULT listwidget.vacancypartial.expirydate - en-GB **

15/10/20

Deem NaPattaloong

** DEFAULT listwidget.vacancypartial.author - en-GB **

Deem NaPattaloong
Deem NaPattaloong

** DEFAULT listwidget.vacancypartial.author - en-GB **

Deem NaPattaloong
Find out more
Risk analyst - Luxembourg -

Salary:

€54,217 - €67,771 per annum + +Benefits and Bonus

Location:

Luxembourg, Luxembourg (Canton)

Market

Financial Services

Job Discipline

Risk

Industry

Investment Management

Salary

£60,000 - £70,000

Qualification

None specified

Contract Type:

Permanent

** DEFAULT listwidget.vacancypartial.description - en-GB **

.

** DEFAULT listwidget.vacancypartial.reference - en-GB **

NGULUXR

** DEFAULT listwidget.vacancypartial.expirydate - en-GB **

02/11/20

Nicholas Georgiou

** DEFAULT listwidget.vacancypartial.author - en-GB **

Nicholas Georgiou
Nicholas Georgiou

** DEFAULT listwidget.vacancypartial.author - en-GB **

Nicholas Georgiou
Find out more
Credit Risk Modelling Manager

Salary:

£45,000 - £60,000 per annum + + Bonus + Benefits

Location:

London

Market

Financial Services

Job Discipline

Risk

Industry

Investment Banking & Capital Markets

Salary

£60,000 - £70,000

Qualification

None specified

Contract Type:

Permanent

** DEFAULT listwidget.vacancypartial.description - en-GB **

We are working with an exciting bank who is looking to bring on board a Credit Risk Modelling Manager to join the team in London.

** DEFAULT listwidget.vacancypartial.reference - en-GB **

CRM1020

** DEFAULT listwidget.vacancypartial.expirydate - en-GB **

28/10/20

Deem NaPattaloong

** DEFAULT listwidget.vacancypartial.author - en-GB **

Deem NaPattaloong
Deem NaPattaloong

** DEFAULT listwidget.vacancypartial.author - en-GB **

Deem NaPattaloong
Find out more
Commodities - Market Risk Manager

Salary:

£75,000 - £95,000 per annum + Bonus + Benefits

Location:

London

Market

Financial Services

Job Discipline

Risk

Industry

Energy, Resources and Industrial

Salary

£80,000 - £100,000

Qualification

None specified

Contract Type:

Permanent

** DEFAULT listwidget.vacancypartial.description - en-GB **

My CLient are an oil major that are looking to hire a Market risk Manager.

** DEFAULT listwidget.vacancypartial.reference - en-GB **

NGUOL

** DEFAULT listwidget.vacancypartial.expirydate - en-GB **

17/11/20

Nicholas Georgiou

** DEFAULT listwidget.vacancypartial.author - en-GB **

Nicholas Georgiou
Nicholas Georgiou

** DEFAULT listwidget.vacancypartial.author - en-GB **

Nicholas Georgiou
Find out more
View all jobs