By Millbank FX

Businesses that trade internationally face a unique set of challenges. Not least of which is managing exposure to currency fluctuations. With costs, revenues, and contracts often denominated in multiple currencies, any adverse movement in exchange rates can have a profound impact on profit margins.

Many businesses initially turn to traditional banks for currency risk management but often find that bank offerings are limited. Banks typically operate on a transaction-focused model, which tends to be reactive rather than proactive.

The High Cost of Currency Volatility

For companies involved in international trade, fluctuations in foreign exchange (FX) rates can disrupt carefully structured budgets and financial forecasts. For example, a business that imports materials in USD but sells its products in GBP may face rising costs if the GBP weakens against the USD. Without a structured approach to managing currency exposure, these companies risk unexpected expenses, diminished profit margins, and financial instability.

Scenario Analysis:

Imagine a UK company purchasing raw materials in USD to the value of £10 million annually, with a budgeted exchange rate of 1.25 (GBP/USD).

At this rate, they expect the cost to be $12.5 million.

If the GBP/USD rate moves unfavourably by 3% (to 1.2125), the cost to purchase the same $12.5 million worth of goods rises from £10 million to approximately £10.3 million, resulting in an unexpected £300,000 increase in cost.

This £300,000 loss directly affects cash flow, reduces profitability, and potentially limits the company's ability to compete on pricing.

By Partnering with Millbank FX, Business Can Achieve:

• Cost Certainty: Millbank FX helps businesses lock in favorable exchange rates, protecting future cash flows from adverse currency movements. This level of cost certainty allows companies to plan budgets with confidence, safeguarding profit margins even in volatile FX markets.
• Customized Hedging Strategies: Recognising that each business has unique exposures and objectives, Millbank FX works closely with clients to design hedging programs that align with their operational and financial goals. Whether stabilizing costs, protecting revenues, or managing cash flow, Millbank FX’s solutions are tailored to address specific risk profiles.
• Proactive Monitoring and Advisory: With a dedicated team of FX specialists, Millbank FX monitors market trends on behalf of its clients, providing strategic advice on the best times to enter or adjust positions. This hands-on support ensures that companies are not only protected from sudden market swings but can also benefit from favourable market movements.
• Industry-Specific Expertise: Millbank FX understands the unique financial pressures facing international trading companies. By considering factors such as supply chain dependencies, currency-driven cost inflation, and market competitiveness, Millbank FX tailors its services to meet the distinct needs of each client.

By partnering with Millbank FX, companies gain more than just access to currency products; they gain a strategic partner dedicated to supporting their financial success. Through proactive, customized currency solutions, Millbank FX empowers businesses to focus on growth and profitability, confident that their currency risks are expertly managed.

Contact Millbank to discover how we solve these challenges for our clients at https://www.millbankfx.com/contact 

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