How Fluctuating Currencies Affect Business

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currencyThe financial world is incredibly complex and always seems to be changing, especially when it comes to the global market and the multiple currencies used throughout the world. The way that currencies change can affect your business in ways you may not have realized.

These currencies are constantly fluctuating due to changes in the market, such as increases in demand for certain products, and as a result many businesses that operate on an international level find themselves at the mercy of these fluctuations, and it can have a real impact on businesses. Even the most successful brands can find themselves making a loss; for example, although McDonald’s saw an increase in sales in the European market, but the weakening of the Euro meant that their profits were reduced notably from previous years.

If you run a business that carries out any kind of exporting or importing goods, raw materials and so on, you’ll need to be aware of how the exchange rate may affect things for you. For example, a UK exporting firm will benefit from depreciation because of cheaper exports, whereas an appreciation makes exports more expensive.

There are various ways for businesses to protect themselves and minimize the potentially damaging effects that fluctuations in the currency rate. For example, if you run a truly international business, then hypothetically the risks of fluctuating currencies are lower, because while a currency in one country has reduced in value there will be growth in another, enabling you to better recover any losses in profit. However, if you are exporting internationally on a more limited basis, then you may need to take certain precautions, and it’s always a good idea to keep an eye on growth opportunities in other parts of the world so you can take advantage whilst the exchange rates are good.

Your business practices can also help you to minimize the risk. For example, making use of dedicated financial services that can handle your transactions for you is one of the best ways to minimize the influence that currency fluctuations can have on your business. Companies like Ebury operate online and can provide you with a service anytime, anywhere. Alternatives include locking in an exchange rate for a fixed period of time, and purchasing currency in advance means you can take advantage of old rates for large purchases, and eliminates any concerns surrounding volatility.

Running a business on an international level can be tricky, but with careful management you can successfully minimize the risks involved with the fluctuating currencies across the globe. Work carefully and keep an eye on the global market at all times.

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