Local Enterprise Office Waterford helping Waterford Businesses get Brexit Ready

Currency Risk Management

From October 31st how we trade with the UK will change profoundly.  Waterford companies that trade with the UK will need to take steps to mitigate the impact of trading with a non-European Union country and once the UK leaves the European Union and Customs Union, it will be regarded as a “Third Country.”

However, it will not just be customs, supply chain management and certification that will be impacted by Brexit.  Currency fluctuations are anticipated to have a major impact on how businesses trade with the UK post-Brexit.

Currency volatility has been evident since the 2016 Brexit vote. The value of sterling has depreciated approximately 13% against the euro and weak sterling remains a challenge for businesses, especially those that export to the UK.

In order to mitigate the uncertainty and avert the challenges associated with currency risk, there are several practical guidelines that can be followed if your business exports to the UK:

  • Enterprise Ireland has devised a Currency Impact calculator to help understand the effect of movements in the sterling/euro exchange rate on businesses and to quantify the exposure your business is open to. The free online tool is widely available at www.prepareforbrexit.comand demonstrates what an adverse change in exchange rates will have on business profitability. 
  • Based on your businesses level of currency risk, a comprehensive and robust risk management policy is advised as this will anticipate the levels of currency risk your business can comfortable tolerate.
  • Getting two prices or Dual Invoicing (in euro & sterling) is another way to manage your currency risk.  By getting two prices you will be able to see the effect of exchange rate difference and have more information to choose the best payment option.
  • Consider getting a forward contract.  This is an agreement with your bank to exchange a specified amount of foreign currency at a specified date in the future.  This will mitigate the uncertainty around future fluctuations and make forecasting easier.

Richard Hurley is Manager of The Granville Hotel, a Waterford hotel renowned as the birthplace of Thomas Francis Meagher and has been planning for the impact of Brexit for the last two years.

“The impact of currency volatility is something that is particularly felt in the tourism sector.  The dip in sterling is certainly affecting British holiday makers travelling to eurozone countries.  And those that do visit are spending less, as sterling is not yielding a great return against the euro.”

“However, here at the Granville Hotel and more generally within the hospitality sector, forward planning is intrinsic.  Whilst the Irish Hotel Federation is continuing to work with the Government and State bodies to mitigate the potential damage, market diversification remains a key focus for Fáilte Ireland and Tourism Ireland, in addition to providing supports for tourism businesses in relation to digital capability, sales skills and operation efficiency.

“Working together as a destination and caring for the visitors ought to create demand across both the domestic and international market.  An example of this has been the collaboration in the food tourism sector resulted in Waterford been awarded the Foodie Destination of Ireland. We are so fortunate that Waterford and the southeast as a region has so much opportunity.”

Richie Walsh, Head of Enterprise at Local Enterprise Office Waterford said that currency risk management is imperative for businesses that export to and trade with the UK.

“The current level of currency volatility is influencing businesses of all scales.  Recognising your risk level and putting in place a financial risk management plan is key to weathering the Brexit storm.  If companies have the infrastructure in place to respond more effectively to the challenges of currency instability, it will certainly stand to them in the long run.”

“Local Enterprise Office Waterford is working closely with Enterprise Ireland and Government agencies to provide a range of programmes and support to help Waterford businesses get Brexit Ready.”

“We would urge any business that hasn’t addressed the impact of Brexit on their company to get in touch with us today.   We have appointed a panel of Brexit-specific mentors, are running a series of free Brexit clinics that cover all aspects of customs, supply chain management, certification and currency risk management. Local Enterprise Office Waterford also has a dedicated #BrexitReady advisor to provide information and direction regarding each businesses’ Brexit vulnerability.”

If you have any queries regarding your business and Brexit, talk directly to LEO Waterford #BrexitReady advisor, David Walsh, by calling 0761 102 905 or email dawalsh@waterfordcouncil.ie