North American Businesses Braced for Increased Currency Volatility in 2017: AFEX Survey
Majority (56%) expect currency volatility to increase in the coming year due to increasing geo-political risk, coupled with a third (32%) citing it as the biggest challenge to managing risk
AFEX, one of the world’s largest non-bank providers of global payment and risk management solutions, today announced the results of its third annual Currency Risk Outlook Survey, which reveals that North American SMEs are concerned and alert to the currency risks brought on by increasing global political uncertainty.
The survey questioned more than 650 financial decision makers globally at SMEs engaged in international commerce about their attitudes towards global trade, foreign exchange risk and their methods of managing it.
Preparing to thrive despite global uncertainty
A majority (56%) of North American businesses surveyed expect currency volatility to increase in the coming year, while nearly one third (32%) cited currency volatility as the biggest challenge to managing currency risk.
Despite the expected increase in volatility, companies see themselves as well positioned to deal with this unpredictability, as 32% expect to increase international trade in 2017.
Asked which global events have most affected their company’s risk mitigation strategy over the last 12 months, North American clients cited U.S. monetary policy (36%), the 2016 U.S. presidential election (28%), the ‘Brexit’ referendum (16%), and European monetary policy (16%) as the primary factors.
“Concerns over currency volatility dominate this report given the major political events that transpired in 2016, namely the Brexit referendum and the U.S. election, as well as uncertainty regarding U.S. and UK monetary policy,” said Jan Vlietstra, Chief Executive Officer for AFEX. “However, the findings reveal that many businesses have tools in place and are taking an active approach to managing their currency risks, in order to not only stay afloat, but to continue the pursuit of international growth.”
Managing foreign exchange risk
Although an active approach to managing currency risk is enabling North American businesses to take advantage of opportunities around the globe in any economic climate, managing that risk is also at the core of protecting the business itself. Thirty-nine per cent of respondents have at least half of their revenue exposed to foreign currencies, while 11% are fully exposed (100%).
Nearly all (95%) respondents in North America indicated that they intend to either maintain (66%) or increase (29%) their use of risk mitigation strategies in 2017.
Twenty-three percent are planning to make use of forward contracts, which allow firms to lock in a price for up to 12 months in advance to provide certainty and protect a business’s bottom line, while one in five (22%) intend to pass currency risks on to their suppliers and customers.
Unsurprisingly, the biggest challenges to mitigating currency risk cited by North American respondents were global economic policy uncertainty (51%) and currency volatility (50%).
The challenges highlight the advantage for businesses in utilizing flexible, effective tools to manage currency exposures, as well as having access to advisors with deep industry expertise, coupled with knowledge of their clients.
“As indicated by the survey results, businesses are expecting more volatility in the coming year, but they aren’t letting that deter their growth ambitions,” said AFEX’s Americas General Manager Christian Spaltenstein. ”AFEX is dedicated to supporting our clients holistically, encompassing payment efficiency, FX expertise and timely and sound advice.”
About the survey
AFEX polled clients based in the United States, Canada, the United Kingdom and Australia, and across a wide range of industries, to determine their perspectives on currency risk and what strategies they employ to mitigate that risk. The survey was conducted from January 17th, through February 2nd 2017, with 662 respondents in total. Click here to view the full results.
Established in 1979, AFEX is a leading global payment and risk management solutions provider that specializes in cross-border transactions and provides market expertise and unrivalled customer service for businesses and private clients. With a client base of over 35,000 active commercial customers worldwide, AFEX prides itself on tailoring its payment and foreign exchange services to meet its clients’ needs. AFEX’s online payment platform - AFEXDirect provides clients with one consolidated overview of their currency exposure and makes it easy for companies to manage international invoices. AFEX maintains offices across the Americas, EMEA and Asia Pacific.