Individuals and Businesses may have a need to convert currency for a commercial purpose, such as buying or selling goods and services overseas.
Foreign Exchange Risk Management Strategy
If movements in the exchange rate are not managed effectively they can present a significant risk impacting profit margins, cash flow and price competitiveness. With a typical customer potentially purchasing significant volumes of currency on an annual basis, even a modest movement of 1-2% in exchange rates can have a material impact on the price of goods and services, or an organisations financial performance (for example, annual volatility in GBP/USD has averaged 12.9 per cent. over the past 10 years).
Foreign exchange providers can offer a currency risk management service via various products such as Spot trades, Forward Contracts, Limit Orders and Rate Alerts that seeks to help individuals and corporate clients decide when, how much, and how far forward to buy currency.