Lessons to learn: a higher euro threatens corporate Europe; how to handle this
| 26-9-2017 | Rob Beemster |
Do you run a business in Europe and the world is your market? Then you must face jitters due to the currency developments in the US and UK. The huge impact of Brexit on the sterling has seen a devaluation of around 30% against the Euro. The US dollar has weakened some 15% compared to early 2017.
These currency moves will be welcomed when you are importing from the US and/or UK. However, when you are exporter, than you don’t feel jitters but the pain will seriously hurt you. Many exporters see their UK/US market share diminish, or maybe even disappear. Normally, when a currency of an export market drifts down ( so the own currency gets more expensive ) we see price adjustments of the exporter.
First he will decrease his own margins, then he seeks price adjustments of his suppliers. After that , the whole chain will be analysed to look for improvements and cutbacks.
The Chinese have a saying that every crisis offers new chances. What chances would a weaker sterling and weaker dollar offer European exporters?
A, analysing the whole value chain, may offer new insights whereby you can create higher and/or cheaper production Most probably, these insights can give opportunities to improve your sales to other markets as well. Improving your chain, constantly, is a very wise technique to stay ahead of your competition. Before the introduction of the Euro, Germany worked on this strategy for years. Bundesbank was a strong supporter of a firm German mark, so German exporters had to be aggressive and innovative to keep their business alive.
B, doing business outside the Euro territory brings currency risk. This is a component of your business you have to face. However, currency risk on new and running orders can be hedged. By doing so, you will protect your cash flow ( read profit ). When profit margins are low, it is extremely important to have a good currency strategy. But even when margins are fairly high, a long currency move may take off your market share. Sterling has gone down for almost 2 years now. So a “safe market” should be hedged with a currency strategy too. A lucrative market may drift away by an ignorant behaviour of exporters.
Barcelona valuta experts can help you installing a decent currency strategy. We do not look for the cheapest way of doing your transactions but we look to your whole currency process. In the graph, below, you will notice that currency risk is present during the whole process. We can help you from the first step: the offer to prospects till last payments are done.
We have a very interesting proposition for you, a free currency scan. After answering six easy questions, we can judge your currency overall / risk position. We will discuss the result with you, all without any obligation. Are you interested? Call us on +31228528579 or mail to [email protected] and we will pass you the questionnaire.
Owner of Barcelona valuta experts BV
