Q&A Session about Commercial Foreign Exchange with Barry Dowling

Commercial Foreign Exchange specialists, TransferMate facilitate businesses with international interests, sending or receiving funds around the globe. We asked Managing Director, Barry Dowling about how TransferMate helps businesses manage their currency exposure and improve how they send and receive money.

What is currency exposure?

Foreign exchange exposure is classified into three categories: Transaction, Translation and Economic Exposure. Transaction exposure concerns actual foreign currency transaction. Translation exposure deals with the accounting picture and economic exposure deals with macro level exposure which may be reflective of the whole industry rather than just the firm under concern.

Foreign exchange exposure is said to exist for a firm when the value of its future cash flows is reliant on the value of foreign currency / currencies. If an Irish firm sells products to a US Firm, cash inflow of the Irish firm is exposed to foreign exchange and in case of the US based firm cash outflow is exposed to foreign exchange. Why we are so dubious about this exposure? Simple! It is because the exchange rates tend to change or fluctuate.

When exchange rates are unstable, companies rush to curtail potential losses. What risks should they safeguard—and how?

Recent swings in worldwide currencies have brought exchange-rate risk back to the forefront for businesses engaged with suppliers, manufacturers, or clients trading in different currencies. While official, or “nominal,” exchange rates are inclined to draw the most attention, what really makes a difference to businesses are changes in real terms—that is, when currency changes are adjusted for differences in inflation. Ideally, if prices were to tumble as currency values climb, or vice versa, then the buying power of companies’ would be steady, and the risk would be negligible. While things can often level-off over the long term – short term considerations are far more complex.

Could you give an example?

Yes, for instance if we look at the relationship between the Euro and the Dollar; since December when the ECB disappointed the market, the Euro has risen in value to a range of $1.09 – $1.11. However over the past thirteen to fourteen months, the Euro has lost 10% against the Dollar. It is this loss of value which businesses can mitigate through a variable flexible spot contract.

A flexible spot contract is a product that TransferMate has developed to allow you to book an exchange rate to be paid for by a future date. If you need to make or receive a payment at a future date and want to know now what it will cost you at that future date you can book the exchange rate now safeguarding your profit and providing you a clear cost picture to allow you to budget effectively. We can enter into a spot contract with you and agree on the payment terms for that future date, subject to adequate approval of your credit circumstances.

We are proud to announce Transfermate as one of our 2016 event supporters. Barry Dowling will be speaking on stage on April 14th to share the Transfermate story. To book your place visit – http://bit.ly/1Lambyz