E2E 100 partner Universal Partners: how to protect businesses from currency volatility - the fintech way
A customer focused approach to mitigating risk, coupled by new tech, can help businesses manage day to day currency fluctuations and protect their bottom-line
With currency volatility posing such a massive financial threat to businesses globally, it is our sole mission to ensure this threat is kept at bay. Growing businesses cannot afford to have progress interrupted by uncontrollable factors, and we have a truly unique approach that gives international businesses more control over what was previously thought to be uncontrollable.
A deeper understanding of currency risk
When looking at FX risk, it is common amongst our clients that the only threat is the day-to-day volatility and that the way to mitigate that risk is to hedge currency at a comfortable rate. However, financial departments of growing companies should look a bit deeper. Significant financial gains can be made with a broader understanding of the different risks and a more agile approach to hedging currency. Avoiding negative market movements is of course a wise move, but what happens if the market moves favourably and your hedge now sits at the bottom end of the market? Your business is no longer protected but instead tied up in a loss-making contract with no exit in sight.
A change in mindset throughout the financial world has increased demand for more creative solutions rather than the vanilla products that no longer deliver what businesses need. However, are there many companies out there offering these solutions?
Our unique offering in a changing landscape
Established in 2017, Universal Partners was created to offer a different approach to traditional banks and brokers – and focus entirely on the needs of the customer. Working across a diverse range of industries and business models, it is inevitable that the requirements of each individual customer will also be incredibly diverse. With that in mind, Universal Partners operates with a client first, consultative approach along with the ambition to utilise technology to develop innovative hedging solutions for our clients.
Using the previous example of a client who has a loss-making hedge in place, Universal Partners have pioneered a new product that enables businesses to blend their current contracts into more favourable ones, therefore increasing the value of their international transactions and boosting their bottom-line. This is achieved through a proactive response to market movements which results in new, concurrent contracts to be added and achieving a better overall rate for a longer period.
We have developed bespoke technology that not only enables this strategy to be executed, but also gives customers complete transparency over their market position which results in more clarity over future strategic decisions.
Looking across the FX and payment industry, the changing landscape of mergers, consolidations and job losses has led to a wave of client mismanagement. As businesses seek more flexible strategies, they are presented with the same products that focus more on the revenues of the broker than their own requirements. With this being the case, we are seeing more and more corporates adopting our approach and reaping the benefits.
What are the measurable benefits to this approach?
Like any situation that causes alarm, market volatility can often lead to panic and knee-jerk decisions if the wrong strategy is in place. Staying one step ahead of the market affords businesses the necessary time and confidence to always make the correct strategic decisions on an ongoing basis. Working with a proactive and consultative partner like Universal Partners means that the hard work is taking place behind the scenes to ensure the financial objectives of your business are met.
With USD moving from 1.08 to 1.27 in the space of a year, it means that businesses selling dollars are subjected to a 17.5% rise in costs on USD transactions. For buyers, this is good news, but what we have found is many buyers hedged at a rate around 1.14 and are now making losses against the market. By executing another contract at around 1.23 back in March 2023, it means that the overall position has been improved to achieve a blended rate of 1.19, which on an exposure of $250,000 per month would result in gains of over £100,000.
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