A company no longer has to be a massive, multinational conglomerate to be exposed to foreign exchange fluctuation risks. Small businesses are going global, too, establishing partnerships and business relations with customers and suppliers overseas, as well as physically traveling across borders.
According to Jay Wissema, director of business development at cross-border payment solutions provider Volopa, recent events in the global markets have heightened awareness of the importance of foreign exchange volatility risk mitigation.
“There have been recent events that have escalated the importance of FX volatility and managing it, whether it's trade disputes happening internationally at the moment, or Brexit,” he told PYMNTS in a recent interview.
A recent survey from American Express found that small businesses that export across borders remain optimistic about their futures, yet have had to adjust their business strategies as a result of such market turmoil. Nearly one-third of SMBs surveyed said they have changed their exporting strategies in the last year as a direct result of trade disputes, while 28 percent cited political instability behind their decision to make changes to their business strategies.
Part of SMBs efforts' to address a volatile market should be FX risk mitigation. Unfortunately, while small business owners are increasingly aware of the importance of currency management, Wissema told PYMNTS that they largely remain unaware of the tools available to do so.
“I would say many businesses do not fully understand, or have awareness of, the different risk management tools,” he stated.
As FinTechs step into the cross-border payments and FX management space, there are more solutions available than ever to the SMB. One tool that some businesses may want to consider is the prepaid card, which has the capability of pre-loading multiple currencies at a set exchange rate. This strategy, Wissema and Volopa Managing Director Graham Smith told PYMNTS, can provide enhanced control and visibility into the exchange rates companies are paying when employees travel abroad, regardless of where or when they make the payment.