Foreign exchange risk management strategies are actively being used by Australian businesses to manage issues around cashflow and margins according to a new survey of 450 financial decision makers in four major developed markets.
The research, conducted by AFEX in late June, among small and medium enterprises (SME) in Australia, Canada, the US and the United Kingdom found that Australian SMEs were the most advanced users of currency risk hedging tools and most likely to continue using them.
The AFEX survey found that 45 per cent of Australian SMEs used currency hedging tools to tackle concerns around cash flow and margins in comparison to the global average of 32 per cent.
More than 90 per cent of those using these strategies also indicated they would continue to use foreign exchange risk mitigation strategies either at the same level or higher than they have done so in the previous year.
The survey covered firms which operate across a range of sectors including manufacturing, retail and wholesale trade, mining, construction, agriculture and professional services including education, finance, health and property.
The survey found that 35 per cent of SMEs in these areas worldwide used hedging tools to mitigate currency risk with only 29 per cent planning on using them again in the coming year.
AFEX Australia, head of dealing, David Greene, said interest rates movement played a large part in Australian SMEs choosing their hedging and currency strategies with a divergence between Australia, which tightened rates, and the US, which loosened them.
“As interest rate policies continue to diverge this poses a bigger risk for the Aussie dollar, as does the ongoing fall in commodity prices. In this market, all currency exposed businesses can benefit by putting a risk management strategy in place. Australian exporters can create security around minimum revenue and importers can lock-in their expenses,” Greene said.
