Lack of planning leaves SMEs vulnerable to currency volatility

New research* from AFEX has found close to half (49 per cent) of Australian SMEs are not currently managing their currency risk, which could leave them unnecessarily exposed in the year ahead.

This is particularly concerning as the majority (62 per cent) of Australian SMEs predict increased currency volatility in markets this year.

AFEX’s third annual Currency Risk Outlook Survey polled more than 650 financial decision makers at SMEs and corporations from across the globe on their attitudes and behaviours around global trade, foreign exchange risk and methods for managing it.

AFEX Asia Pacific General Manager Richard Poulton said the research highlighted a real disconnect in the expectations and actions of Australian SMEs.

“It’s concerning to see so many Australian SMEs predict a volatile year, but fail to implement a currency risk management strategy. Importers and exporters really should not risk cross-border trade without profit protection,” Poulton said.

“2016 was full of surprises and too many SMEs were unnecessarily exposed to the impacts of Brexit and the US presidential election. 2017 is already shaping up to be another year of uncertainty, so SMEs should do everything in their control to protect their hard-earned profits.”

The survey found a number (21 per cent) of Australian SMEs even planned to pass on currency risk to their suppliers and customers in the coming year.

“For small businesses without the scale to absorb the impacts of a volatile dollar, they see no other option but to increase prices to protect profit margins. An effective currency volatility management strategy could eliminate this concern and ensure SMEs aren’t priced out of the market.”

SMEs anticipate increased cross-border trade

The survey found over half (52 per cent) of Australian SMEs expect their levels of international trade to increase in the coming year and foresee market volatility (58 per cent) and global economy policy uncertainty (48 per cent) as key challenges for expansion.

Respondents indicated the United States, China and Western Europe will be key markets for trade growth in 2017.

Poulton said opportunities for Australian SMEs to engage in global expansion and trade had never been greater.

“Not only is customer demand high, but new technology is making international shipping and logistics easier and more accessible than ever. A currency management solution is one more way that SMEs can reap the benefits of global trade and allow them to focus on running their business.”

* https://sf-asset-manager.s3.amazonaws.com/95763/412/769.pdf

Inside Small Business

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