According to Pierre-Antoine Dusoulier, CEO and Founder, iBanFirst, they need these qualities in order to make accurate projections and ultimately to develop strong business strategies.
Whether for internal planning or securing external investment, managers need to have a clear handle on how much they are going to be charged for goods, services and people – and how those costs stack up in the wider marketplace.
But while some business costs are relatively easy to predict and calculate, others can be somewhat murkier, particularly for small and medium sized enterprises (SMEs). Foreign currency exchange payments are one such area.
In a globalised economy, being able to make and receive foreign currency payments in a fast and reliable way is crucial for more and more businesses, even the smallest. Foreign currency payments enable businesses to forge relationships with customers, partners and suppliers all over the world and to expand into new markets.
In a globalised economy, being able to make and receive foreign currency payments in a fast and reliable way is crucial for more and more businesses, even the smallest.
Indeed, back in 2013, Oxford Economics statistics predicted that the number of small businesses doing business in more than six countries would increase by 129% over the next three years, whilst the most recent Oxford Economics SME Pulse report found optimism in the global economy and an international outlook. In November of last year, the ONS reported that the number of UK SMEs exporting internationally had increased to 232,000, representing around 9.8% of all SMEs.
International business requires international currency payments. However, there are multiple costs associated with such payments, and small businesses are disproportionately affected.
First, and most obviously, banks levy fees for making and receiving foreign currency payments – and unfortunately, these can be substantial, particularly for SMEs. Additional costs are often hidden and absorbed into the exchange rates offered. This makes it very difficult for smaller organisations to understand both exactly how much they are being charged for foreign exchange currency payments, and how those charges compare to those offered to bigger businesses. Studies have found total spreads of up to 3.71% being charged, including fixed fees, and as a result it has been suggested that the UK’s small businesses hand over around £4 billion to the major banks every year, simply in order to buy goods and services abroad.
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Then there’s the question of currency hedging. Organisations of all sizes engaged in transactions in foreign currencies are exposed to currency risk, which can in turn have a significant impact on commercial margins. Once again, SMEs are particularly at risk, because their banks are less likely to offer them currency hedging solutions compared to those on offer to larger organisations. The Brexit referendum result was a stark reminder of how quickly currencies can suffer sharp devaluations, with pound sterling diving against the euro. Many small businesses experienced double-digit losses thanks to that devaluation, because their banks did not offer them a currency hedging option.
So what is to be done? All organisations, but particularly SMEs, need a foreign exchange model which is cost-effective, efficient, transparent and reliable. They need to be able to have greater visibility of the costs of foreign exchange payments by incorporating them into their existing business plans to manage risk effectively.
For businesses to thrive in an international environment they need to harness financial solutions that can equip them with a foreign exchange offering which helps them facilitate transactions in real time, providing the most favourable currency rates to drive cost savings across their business.
By harnessing new FX technologies CFOs can reduce the time spent on foreign exchange transactions and their associated costs. Meanwhile, through having greater visibility over foreign currency payments, CFOs can effectively mitigate risk and focus on what is important: taking a strategic role in growing the business.
Said markets present anticipated price developments daily, weekly, monthly and yearly, and when scouting for profits, bidding investors will act according to the market sentiment.
If the anticipated price development of a market’s stock is upwards, meaning the value of certain stock is rising or expected to rise, as a consequence of trends, single events, supply materials, current affairs or many other factors, the market sentiment is expressed as bullish. Vice versa, if the anticipated price development is on the downtrend, by any of the same reasons, the market sentiment is expressed as bearish.
It isn’t always as simple as this however. Market sentiment is also considered to be a contrarian indicator. For example, extremely bearish markets may subsequently display dramatic spikes – the turning point for this is often where the risky decision making appears.
Market sentiment, the overall expression of a certain market as bullish or bearish, is normally determined by a variety of technical and statistical methods that factor in the comparisons of advancing & declining stocks as well as new lows & new highs in the market. One of these is known as the Relative Strength Index (RSI); it relates the number of assets bought to assets sold, indicating whether capital is flowing in or out of the market in question. Normally, as a market follows sentiment either way, the flock follows, meaning the overall movement of the market’s stock follows the market sentiment directly. To quote a popular Wall Street phrase: “all boats float or sink with the tide.” The more investors buy, the more investors buy; it’s usually exponential development.
This of course could happen indefinitely, if it weren’t for the fact that as stock trading volumes rise, as does the price. Eventually the price hits a market high and the potential for profits is minimized. At this point the fall to a bearish market usually comes to fruition. On the other hand, as trading volumes fall, prices go down, to the point where eventually the price is so low it would be foolish not to buy, therefore turning the market on its head.
As obvious as it may seem, the words bullish and bearish reflect exactly what you would expect and are not simply paraphrases. An optimistic investor, happy to buy, buy, buy as the market sentiment is bullish, is considered a bull; aggressive, optimistic and almost reckless, striking upwards with its horns. Equally a bearish investor is considered a bear because he or she does not trade without utmost consideration, he or she is pessimistic towards trading expectations and believes prices will fall, or fall further than they already have. The bear therefore decides to sell, sell, sell, and pushes the prices down; as a bear that strikes its paws to the ground.
Make sure you check one of our top read features ‘The Top 10 Greatest Stock Market Trades Ever’.
With the growing expansion of cryptocurrencies and cryptomarkets, the prospects of regulation are on the horizon. But how will the economy of crypto change in turn? Finance Monthly gains top insight from expert David Sapper, COO at Blockbid.
In recent days, Ripple – one of the world’s biggest cryptocurrencies – has urged UK regulators to take control of the crypto market in the same way Japan have, to put an end to ‘wild west’ days of crypto regulation.
Ripple, amongst many others, are calling for more control in the space to ensure risks are minimized for consumers, whilst still allowing the asset class to innovate and grow.
There is little doubt that such calls will be answered – and that increased control will be introduced in the very near future. Just last month, Chancellor Philip Hammond announced a new taskforce, whose specific role was to safeguard crypto consumers. Whilst even more recently, the FCA announced that they will publish a review in to cryptocurrencies later this year which will ‘outline policy thinking on cryptocurrencies.’
Japan has, as of yet, been at the forefront of crypto regulation – and so provides a good indication of how we can expect it to play out in the UK. There are 3.5M crypto traders active in the country, and $97BN of Bitcoin was traded in 2017 alone1. Part of the reason regulation is so active and advanced in the country is a $500M crypto theft that took place early in 2018. This sparked a selection of sixteen cryptocurrency exchanges to form a self-regulatory organization to work towards developing standards for activities around ICOs.
The re-occurring issue with heightened regulation is the potential for suffocating innovation. ICOs and alt tokens have created a fresh and straight-forward means of raising capital for budding entrepreneurs to use when building their business ideas. Therefore, it is important that regulators practice walking the line between protecting consumers and potential investors, whilst not stifling innovative and creative prospects.
For example, a country that looks to be walking said line with good success is Australia. Already there have been very direct and positive moves with regards to crypto regulation in the country, some of which are already in place. All whilst managing not to stifle or suffocate the innovators at the centre. The biggest move so far is the introduction of the need to register with AUSTRAC before being allowed to function as a crypto exchange, something we at Blockbid successfully did earlier this month. Australia were also second only to Japan in accepting Bitcoin and other cryptocurrencies as legal tender.?
ICOs specifically require their own set of rules and guidelines. They are heavily regulated in the US and banned completely in China. Australia have set guidelines that depend on whether tokens are utility or security based. These guidelines are fairly strong, but allow companies to decide for themselves on which to go down, depending on the type of tokens they have produced.
Such an array of regulatory introductions are likely to have a real impact on companies working within the crypto-space, particularly for those that have been in action from the start, who will have to contend with rules that weren’t in place when they were starting out. However, for the most part responses from companies have been positive as the one thing everyone agrees on, is the protection of consumers is essential.
Precise details of how everything will work out remain unclear and will be revealed in time. Whilst the affects of regulation may appear as hurdles for those working in the crypto space, improved regulation will increase trust and engagement in crypto as a result. Therefore improved regulation is a step in the right direction not only for investors – but the companies behind cryptos as well.
1https://www.ccn.com/japan-leads-the-way-on-crypto-as-trading-soars/
Blockchain will disrupt everything from Silicon Valley to the New York Stock Exchange.
The pound hit an eight-year low against the euro a few weeks back, with the official exchange rate at €1 to £1.083. At some airports, such as Southampton, travelers were being offered just €0.872 to £1. This represents a 15% reduction in value against the euro since the UK decided to leave the EU and comes as Brexit negotiations are dominating the headlines.
Adaptive Insights VP of United Kingdom and Ireland, Rob Douglas, argues that market fluctuation like this is exactly why businesses need to change their financial planning to be as agile and adaptable as possible. He comments:
“While for many it will be those going holiday that are top of mind as the pound devalues, a much greater concern is how businesses will deal with this fluctuation. Not only will businesses likely be dealing with much greater sums of money and therefore potential loss, but as margins are reduced and prices potentially increased, there will be a knock-on effect across the UK economy that everyone needs to be prepared for.
“Businesses need to be able to bend and flex to changes in exchange rates, while minimising the impact on customers and staff. For many, however, this is not a reality. Recent research shows that over half (60%) of CFOs say it takes five days or more to generate new scenario analyses, enabling them to model the impact of market movements such as this, and yet the majority would like it to be a day or less. This unmet expectation by CFOs sheds a light on the need for a different kind of financial planning that focuses on agility and active planning in nearly real-time to keep pace with the rapid changes in today’s businesses.
“For the UK, uncertainty and volatility is likely to become the new norm, which means businesses need to be prepared for the unknown. While being agile will allow businesses to be more responsive, ‘what-if’ scenarios are also fundamental for businesses to understand the potential consequences of the changing market. After all, many would not have predicted that the pound and euro would reach parity.”
