Foreign Exchange Risk Management
Protect your business from foreign exchange rate changes, giving you more certainty over your future cashflow and planning.
How can foreign exchange (FX) risk management help my business?
When you sign up for our foreign exchange services, you will be allocated a local expert from one of our offices based throughout the UK. They will take the time to understand your business, explain the products, help identify the risks you are exposed to and then work with you to develop your foreign exchange risk management strategies. Their aim will be to help you reduce the impact of changes in currency exchange rates. This will give you more certainty over your future cashflow and allow you to focus on building and improving the health and profitability of your business.
- Your FX requirement must be more than £500k a year.
- Your annual turnover is £3m or more.
- You will need a Foreign Currency Account, which we can help set up.
Why choose Lloyds Bank for foreign exchange risk management?
Free access to Arena our digital FX platform
When you sign up for our foreign exchange services you will be automatically enrolled onto Arena, which gives you the option to manage your foreign exchange online.
Wide range of foreign exchange risk management products
Frequently asked questions
By hedging your foreign exchange exposure, you can reduce the financial risk that your business is exposed to when adverse market moves occur. Doing nothing leaves a business exposed to potentially volatile markets and removes any future certainty. Hedging will allow you to:
- Have better margin control - By locking in your GBP equivalent costs and revenues, you remove the possibility that market moves could erode your margins.
- Better cashflow forecasting - Hedging enables you to forecast more accurately, potentially allowing you to streamline your working capital requirements and optimise any deposits you place.
- Reduce fluctuations in your profit and loss - Hedging could reduce your P&L volatility, by potentially reducing your exposure to significant market moves.
Before entering into any foreign exchange transactions there are a number of factors which you should consider. These factors relate to how your business operates and the currencies which impact your business. How you deal with these factors will help you to identify and understand your risk tolerance. Which product is right for you is best determined by your risk tolerance, the need for certainty or peace of mind balanced against your desire to participate in profit maximisation. Below are a few things to start considering. Your specialist can help with any questions you may have.
- What are your expected periodic currency flows?
- Are they going to change in the foreseeable future?
- Is your foreign exchange exposure subject to business cycles?
- Are these predictable?
- What is the tolerance level of your business for future foreign exchange rate movements?
- Which foreign exchange rates affect your business?
- How volatile are they?
- Are the currencies you deal with freely transferable?
- What is the likelihood of political and economic factors adversely impacting the currency in the foreseeable future?
We pride ourselves on maintaining a local presence all over the UK and this includes our foreign exchange specialists. They work side by side with you and will take the time to understand all the needs of your business, help identify the risks you are exposed to and work with you to build a strategy to manage them so you can focus on what matters.
If the solution needs to be sourced from another area of the bank, your specialist will arrange an introduction and monitor progress to make sure you are getting the right help. They will also provide updates on what’s going in currency markets and how developments in global politics and economics are influencing exchange rates. Their aim is to give you all the tools and information we can to allow you to make informed decisions on your risk management strategy.
This is the simplest form of currency conversion and caters for immediate needs at the current market rate. This means you will be fully exposed to market movements as you will be converting at the prevailing rate on any given day and does not provide for any future certainty.
If you want to have certainty over the exchange rate at a future date and remove exposure to future exchange rate movements then a FX forward contract will allow you to buy and sell currencies in advance, at a fixed exchange rate, giving you more certainty over your cashflow.
These provide you with flexibility around when your currency conversion takes place by locking in a rate for a specific amount of currency and giving you a period of time or window during which to draw down on the contract. This can help manage any changes in when payments need to be made or uncertainties around expected deliveries or payments for goods or services.
This is an agreement where you can exchange one currency for another on an initial settlement date, and then re-exchange the currencies on the final settlement date, with all exchange rates agreed at the point of transacting. This means you will know the cost of the transaction in advance which offers protection from an unfavourable movement of the exchange rate during the term of the swap of the currencies.
- Please note all our rates and charges and terms and conditions will be provided to you by our sales team during the application process.
- Products are subject to credit approval.