• Phil Monkhouse, Head of Sales at Ebury


• 25.01.2023 04:30 pm
#business

Going into 2023, we expect to see continued difficulties for businesses, but hopefully less severe than in 2022 as inflation reduces and central bank tightening eases. With businesses now adjusted to the pound’s lower level, they should better understand how to mitigate market volatility. 

We highlight three predictions that businesses should watch out for in 2023.

Appreciation in high-risk currencies 

We anticipate the end to central bank interest rate hikes and the possibility that downturns in global activity won’t be as bad as earlier expected. This provides a conducive environment for an appreciation in high-risk currencies in 2023.

USD may weaken against the G10 currencies

The recent sharp retracement in the US dollar may have more room to run against most G10 currencies. The extent of these moves depends on the resilience of economies and the timing of when central banks globally will end their tightening cycles and begin cutting interest rates

Fast and easy credit 

Access to credit will become more open and transparent, with an increasing range of offers and providers as the Embedded Finance trend gathers more momentum.

How businesses can stay ahead of the competition in 2023 

We expect FX volatility to remain; inflation is still set to be stubbornly high this year (despite higher interest rates), and recessionary fears to linger. However, we recommend three best practices to navigate the volatility and flourish even during testing times.

Build a robust FX risk management policy 

A solid risk management plan helps you decide when to hedge pragmatically rather than getting swayed by the current market volatility. With an agreed percentage of expected FX exposure hedged for the next 1-2 years (typically 25-75%), you will be able to weather whatever surprises the market may bring and ensure you protect your profit margins.

Review your cash management strategy 

Selling in local currency to your customers often drives more revenue, and by taking their currency it reduces the friction to trade. You can set up a network of multicurrency collection accounts worldwide, hold balances, convert them for use in another currency or payout to suppliers — leaving you in full control. These collection accounts can even be connected to payment gateways for your online sales.

Ensure access to flexible cash flow 

As interest rates continue to rise, having access to a sufficient and flexible Trade Finance facility that you can utilise when you need it without any set-up or maintenance costs is critical. This can be used to pay suppliers early, negotiate an early settlement discount and ensure you squeeze every bit of margin to remain competitive in 2023.