Ebury estimates that insufficient currency risk mitigation is responsible.
Ebury, the fast-growing financial services company that helps businesses to transact and trade internationally, has estimated that British SMEs have lost over £10bn in the last 12 months because of deficient risk management with regard to their currency exposure.
In a new white paper, Ebury outlines the reasons behind these great losses, including the volatility of the foreign exchange market, particularly with emerging market currencies, the risks involved in international fund transfer and lack of local market insight.
Expanding overseas is the perfect way to grow a business, especially an SME. International trade however holds a number of risks, which can create extensive additional costs when they are not given due consideration.
As the white paper identifies, a lack of local market knowledge in particular has had a significant impact on British SMEs as many struggle to adapt to the risks presented by expansion into new territories. For example, the recent lull in fluctuation of the foreign exchange market has instilled a false sense of security meaning that large numbers of SMEs have failed to cover their risks, particularly where emerging market currencies are concerned.
In order to successfully pilot volatile and unfamiliar markets, SMEs must make a significant investment of time and resources. The white paper titled ‘5 Major Foreign Exchange Risks’, provides the tips needed to address these issues. By accessing the correct market insight and understanding local markets, businesses can mitigate their risk and take advantage of the opportunities available to those trading in these areas.
“The past year represents a missed opportunity for SME leaders,” comments Enrique Diaz, Chief Risk Officer at Ebury. “We need to see more SMEs empowered with the correct skills and knowledge to navigate international markets.”
“Having the ability to deal, trade and pay a supplier in their home currency is extremely beneficial and companies can gain a competitive edge. Whilst banks may seem like an obvious choice, there is a reluctance to provide the level of service that SMEs require. That is where alternative service providers can prove more beneficial and it is certainly worthwhile for SMEs to review the available options.”