Currency risk management is a relatively complex topic, and the vast majority of small businesses don't possess the knowledge or personnel to handle it properly. Dealing with inflow or outflow of foreign exchange payments requires a very specific expertise, which includes:

a.     Forecasting the accurate amounts of foreign exchange inflow (broken down by currencies).

b.     Forecasting the accurate amounts of foreign exchange outflows (broken down by currencies).

c.     Understanding the different fx hedging options available on the market for corporate clients.

d.     Figuring out the level of risk associated with each type of option, and knowing the business well enough to choose the right option.

e.     Figuring out the right time to buy options, or even trade currencies at the spot price, by keeping up to date with the foreign exchange market.

f.      Choosing the right provider to minimise associated fees.

While large-scale importers/exporters may have an employee that could do that in-house, most small businesses don't have someone that fit the criteria onboard, and it does not make sense to hire one.

The simple option

There are hundreds of foreign exchange brokerages in the UK, predominantly located in the City of London, which are geared at small businesses. They provide 3 main things that a small business can enjoy, none of which is offered by the bank:

a.     Guidance: each corporate client is assigned with a specialist foreign exchange dealer which can help him strategise its foreign currency payments.

b.     Access to FX options (only top brokerages can offer that): as banks are notorious in preventing access of small businesses to such options, currency brokerages are happy to offer a large variety to both private and corporate clients.

c.     Wholesale rates and no transfer fees: While an overseas bank transfer levies heavy fees with high-street banks, foreign currency providers are happy to offer a fee-free transfer option. In addition to that, the rates they are providing are substantially better than what small businesses can find in banks.

Finding a brokerage

As mentioned above, there is a plethora of companies to choose from. How would a small business owner or CFO know where to look?

MoneyTransfercomparison.com is a site built specifically for that purpose. It reviews the major competitors in the market, assigns a rating score to each, and enables clients or prospective clients to leave their comments, reviews and queries.

The rating is made of several areas which are carefully covered and reviewed:

a.     Credibility - how large is the brokerage, how many clients does it boast, when was it established, who are the owners, is it properly regulated, and so forth.

b.     Service - the level of service offered by the firm, based on direct contact with the firm, and aggregation of client reviews from across the web.

c.     Fees - what kind of fees are levied for an international money transfer, and what kind of exchange rates are likely to be proposed to prospective clients.

The site repeatedly recommends clients to sign up with multiple companies so they would be able to compare the level of service and level of "comfort" working with each company, as well as to compare quotes. It is important to keep in mind that quotes, especially for large transfers or repeating clients, are flexible. Bargaining the pricing can help save hundreds or thousands of pounds.