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There is no doubt that the last two years of a pandemic have been challenging for businesses around the world. For small and medium enterprises especially, currency market volatility has meant that profit protection and cost management have taken center stage as businesses find ways to move forward.
With the rise in digital technology and a move to selling online, E-commerce has boomed. For sellers however, it’s not always an easy process. Businesses that frequently transact across borders are at risk of supply chain disruptions and are vulnerable to the exchange rate fluctuations that come with overseas transactions.
In fact, according to Cissy Hon, Head of Sales & Partnerships of OFX, Hong Kong, sending or receiving money overseas for many of these businesses means exposure to FX risk, which could be the difference between profit and loss.
“FX risks are caused by exchange rate fluctuations, and those can have a huge impact on your costs and profits,” Hon said. “The pandemic has caused great disruption to logistics which has led to prolonged shipment times, meaning longer lead times between placing orders and receiving settlement, and this means higher exposure to currency fluctuations.”
Research conducted in 2020 by market research firm East & Partners shows that businesses have suffered currency losses as high as US$71,400 because of foreign exchange (FX) volatility. The study further revealed that within a 6- month period, 64% of Asian small and medium enterprises (SMEs) have suffered an average loss of US$11,500 per transaction.
For this reason, OFX has been filling a gap in the market by offering not just global money transfer services, but also strategies and practical FX solutions such as hedging to help businesses, especially SMEs, to weather the pandemic storm.
“This is an opportunity for SMEs to take control by actively engaging with FX risk management knowledge and products,” Hon said.
And there are many advantages to this. Firstly, Hon said that by having an OFX Global Currency Account, companies can pay and get paid like a local even when they are selling overseas. They can receive money and collect and hold funds from international marketplaces such as Amazon and eBay, or even payment gateways such as Paypal.
Another advantage is that businesses can send money using the funds in their Global Currency Accounts to pay international suppliers, fees and taxes using the local currency. This also reduces any unnecessary conversion fees and costs.
