Specialist solutions for businesses’ forex needs
Clients continuously ask questions such as “where is the currency going?” and “when is it an opportune time to either sell or buy currency?”
“Although seemingly simple, these questions are tough to answer in light of the current volatile economic environment in SA,” says Roberto Rebuzzi, head of Sasfin Forex.
“Regardless, there are only two possible outcomes: the currency will move up and it will move down … but not necessarily in that order.
“Correctly managing the highs and lows can set a business apart from its competitors and reduce its financial risk.”
Rebuzzi says businesses in SA face major challenges — slow economic growth, increased unemployment, the deteriorating fiscal balance and the looming possible downgrades by rating agencies are among the factors that could trigger currency outflows.
POSITIVE SENTIMENT
On a positive note, Rebuzzi says that in spite of these factors, the market has been quite resilient with the price action reflecting positive sentiment as opposed to the fundamental re-rating of the currency, supported by investors seeking higher yields.
He explains that whether an importer or an exporter, businesses are constantly competing in markets where products and service offerings, underlying costs and foreign payment terms are sensitive to currency market movements.
“Volatility can result in the loss of competitiveness, revenue and market share,” says Rebuzzi.
Currency fluctuations will have different implications for importers and exporters.
“As an importer, a weak exchange rate could have devastating financial implications on a business. However, an exporter would have reaped the rewards during such times,” explains Rebuzzi.
Ultimately, all businesses aim to avoid profit margin erosion due to poor currency performance. Says Rebuzzi: “With the ongoing currency fluctuations, the need for experienced forex and treasury management teams that are equipped with the appropriate technology has been recognised to ensure that businesses buy and sell currency at the optimum price.
“Given the probability of these large currency movements, the tendency is to advise businesses of trusty derivative structures with limited downside and possible upside potential, either through gearing or risk reversals.”
He says that an ongoing analysis performed by Sasfin Forex over the past 20 years has compared various outcomes to determine the optimal hedging methodology.
He suggests that a more managed approach of combining forward exchange contracts with spot transactions, and carefully assessing the timing thereof, would optimise results and improve the outcome on the embedded cost of these derivative structures.
“With this in mind, and a clear understanding of the operational risks and challenges businesses face across local and international borders, Sasfin Forex employs customised strategies that reduce businesses’ risks, while retaining the potential for clients to benefit from favourable trends in the market.
“We offer a wide range of solutions to meet any business’s forex requirements,” says Rebuzzi.
He says Sasfin Forex specialises in buying and selling foreign currency; foreign currency risk management; interest rate risk management; cash management; and cash forecasting and advanced reporting to assist businesses with their particular demands.
EXPOSURE
“With these solutions and services provided to businesses, Sasfin Forex sees the challenges turning into opportunities by optimising forex exposures and providing exposure to payment management solutions.
“The customised risk-based approach correctly benchmarks a business’s appetite and risk profile, which ensures financial discipline and evaluative decision making is applied when advising firms on corrective actions,” says Rebuzzi.
“Direct contact with an experienced portfolio manager is another factor contributing to Sasfin’s competitive advantage.
“We are seeing clients who want to have a single point of contact that can provide a business solution in line with their business requirements.
“Our clients have recognised the strategic value of selecting the best forex bank to partner with as an extension of their businesses because of the complexities of the numerous challenges in the market today.”