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SmartHedge helps corporates and SMEs to grow by better managing their FX exposures
In today’s interconnected world, small and medium-sized enterprises (SMEs) often find themselves grappling with currency risk. Thanks to the unpredictable nature of exchange rates, financial executives can have sleepless nights worrying about their cashflows and profit margins. That’s not to mention the amount of time and money many companies spend on managing their risk.
However, certain SMEs have turned a corner in recent times and are increasingly turning to more sophisticated hedging strategies to shield themselves from uncertainties. Let’s take a look at some real-world examples of how companies have effectively used hedging to manage their currency risk.
Understanding Currency Risk
Currency risk is a common concern for any SME engaged in international trade or with foreign currency exposures. Sudden fluctuations in exchange rates – and we’ve seen our fair share of those in recent times – can lead to increased costs for imports, reduced profits from exports and financial uncertainties. Implementing hedging strategies has often proven to be a prudent approach to address these challenges.
In the last quarter alone, GBP/USD ranged from 1.17 to 1.28, while EUR/USD bounced around to record a min/max variance of 13 cents. Add onto that all the uncertainties of currency markets, ongoing conflicts and unpredictable events, and it’s clear to see why SMEs would be well served hedging their exposures.
Real-world context
But don’t just take it from us. Here are a few examples of real SMEs who have benefitted from implementing robust hedging strategies.
Bridgetech, a mid-sized technology firm, found itself in a bind when the pound depreciated against the currency of its primary export market. Fearing the impact on its profit margins, Bridgetech’s finance team opted to utilize forward contracts, another product we beat the drum for here at Smart.
Click here to see how we can help you set up a forward contract.
The outcome was plain to see. Bridgetech successfully locked in favourable exchange rates for its future transactions and removed the uncertainty from its payments. This strategic use of hedging not only protected their bottom line but also solidified its reputation as a reliable supplier, even in the face of currency fluctuations.
Or take apparel manufacturer TextileCo, which struggled with an increase in the cost of its raw materials after currency fluctuations. The company’s leadership decided to integrate a mix of forward contracts and options through their chosen currency risk management platform.
Options are another great way to protect your business. Click here to see how we can help.
After putting the options in place, TextileCo became flexible enough to respond to currency movements while ensuring pricing stability for raw material purchases. This strategic approach not only safeguarded profit margins but also allowed it to maintain competitive pricing. Pretty good for a supposedly defensive strategy, right?
Try the best of the best: SmartHedge
As a savvy 20-year veteran of currency markets, we’ve seen our fair share of companies exposed to currency markets. You’ve seen how effective hedging strategies can be, but traditional methods often come with significant flaws.
That’s why we’ve listened to our clients and built an innovative platform we call SmartHedge, designed to streamline the way your business approaches FX risk. SmartHedge addresses a variety of challenges, from day-to-day needs to long-term planning, offering support and guidance to optimise your business.
To find out how SmartHedge can address these challenges and help your business, contact us to arrange your 10-minute product tour and/or a demo.
Give one of our friendly Account Managers a call on 020 3773 7402 or visit our website to learn more.
To make sure your upcoming transactions are protected against the risks of sudden market movements, call your Business Trader on 020 7898 0500 to discuss a forward contract; alternatively, if you’re new, please register with Smart Currency Business today.
