If you are managing budgets abroad or earning fees from other countries, you most likely have some exposure to currency risk.
At Currency//UK we understand that international invoices can be difficult to manage and with the volatile foreign exchange markets, it can seem almost impossible. It is therefore imperative that you take the right precautions to protect your income.
This short guide will provide you with top tips on how you can reduce your risks significantly when managing foreign currency exchange.
1. Identify your risk exposure:
When earning fees from other countries, it is important to understand a range of different factors to assess how big the risk can be. Some factors to consider are the currency pairs you are dealing with, why you require foreign exchange and how often you plan to make foreign exchange payments.
2. Measure your risk exposure:
It is important to understand how an undesirable rate can impact your profitability. A good practice here is also to look at any future events that are likely to influence the currencies you deal with.
3. Understand all your options:
When dealing with foreign exchange risk, there are a number of different safety measures you can implement to protect you and your business.
Some of these services can include:
Spot contract: this is hedging in a favourable foreign exchange rate will be used for immediate delivery.
Forward contract: this is an agreement that allows you to take advantage of a favourable rate for a future date.
Market orders: These tools give you the autonomy to decide on rates you wish to receive or the minimum rate you are willing to accept. Once this is hit you will then automatically receive this rate.
Photography is certainly an industry where understanding how exchange rates can impact your bottom line is crucial and having a foreign exchange expert by your side to take care of your international payments can be a huge plus.
Internationally renowned photographer James Day is based in London and often works for clients overseas and is paid in currencies other than Sterling.
Like much of the industry he does a lot his overseas work in the US and is therefore billing clients in US Dollars.
James always has the US Dollar income sent directly to his own UK based USD account. He then uses Currency UK to convert the funds from USD to GBP at a much better exchange rate than his bank, or his client's bank offers him.
“The focus is on the shoot, getting the job done to my standards and meeting the demands on the client, with that focus it is easy to forget about what seems like a minor thing like the exchange rate. But what exchange rate you get and from who can make a huge difference to your income from the job."
To find out more about our partnership with the Association of Photographers, please click here.
If you have any questions or would like further advice regarding foreign exchange risk management, please feel free to contact us today on +44 (0)20 7738 0777.
Posted in Business Resources on Sep 4 2019