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The currencies market: Sasfin can help you avoid the risks and exploit the opportunities

The currencies market: Sasfin can help you avoid the risks and exploit the opportunities

The world is operating at an exponentially fast pace bringing, what were once dispersed geographies, into far closer contact through ever improving digital technology. As a result, the Foreign Exchange (Forex) markets have grown proportionately.  However, transacting across political borders comes with both advantages and disadvantages. 

Foreign exchange has become a significant asset type over the past twelve years, corresponding with the spike in digital technology and social media, but foreign exchange still demands crucial and vigilant management.

Tools such as complex foreign exchange structuring mechanisms assist in managingthis market but to succeed, a comprehensive understanding of these tools is required if they are to be used correctly and advantageously.

Companies can also utilise well-tailored hedging techniques that allow them to remove many of the risks which are unique to their type of business.

In recent times, high levels of currency instability often see importers and exporterstrying to hedge their risks by taking various levels of forward cover on their currency exposures. There are numerous contracts to assist in managing this risk, such as fixed, partially-optional and fully-optional contracts.

With Forex it is important to know the threats in order to circumvent them. To attainbenefits in the international market calculated risks have to be taken and there has to be knowledge and anticipation for potential future risks.

Political risks can have ripple effects on currency and can impact on unsettled contracts. Contracts, in their entirety, can be prevented or delayed due to political events.

Operational risks are independent of Forex and, regardless of the country, transit andmanufacturing problems do occur. Failure to meet delivery times, incorrect processing, technology, human error or changes in an order after the production process has begun can add to the difficulties of an international transaction. When the exporter’s production fails, the importer fails and vice versa as their relationship is interdependent.

However, trading internationally also has innumerable benefits. Investing in manymarkets allows for the diversification of funds. Products sales that may be stale internally may be attractive externally, lifting a company’s revenue.  If one country’s economy is depressed and another’s may show high growth and shifting sales focus to countries with high growth will help companies grow themselves.


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