The UK’s SMEs have lost £10 billion in the last year due to a lack of risk management in regards to their currency exposure, new research has found.
A large number of SMEs have taken the plunge and began expanding their trade abroad, but this has exposed companies to new problems including the volatility of the foreign exchange market, particularly with emerging market currencies, the risks involved in international fund transfer and lack of regional market insight.
This last point in particular has had a significant impact on British SMEs, as many have been left struggling to adapt to the risks presented by expansion into new territories.
One problem many UK firms have faced was the recent lull in fluctuation of the foreign exchange market that saw the pound continuing to strengthen, providing a false sense of security and leaving many SMEs without plans to cover their risks, particularly where emerging market currencies were concerned.
International trade has and will continue to hold a number of risks for companies, which can create additional costs if they are not given due consideration when setting budgets and forecasting future problems.
To combat these and other potential risks when trading abroad, SMEs are being advised to make a significant investment of time and resources into planning for these risks.
By accessing good market insight and gaining an understanding of local markets, businesses can better mitigate their risk and take full advantage of opportunities available in foreign markets.