How are Nordic companies managing currency risk today?
While currency exchange rate fluctuations have a direct impact on the profitability of companies that engage in foreign trade, many small and mid-sized companies concerned about their liquidity feel that they cannot manage the currency risk in an optimal way. Lack of in-house competence and lack of time are the main barriers, the study shows.
One company that has taken precautions is Swedish distributor NewGen, which is using a currency risk management strategy called layered hedging. Such FX hedging programs are designed to avoid short–term fluctuations that might threaten companies’ long-term goals. While most hedging frameworks achieve the purpose of lowering volatility, there is no strategy that pushes volatility as low as the layered approach, according to Mattias Göthberg, on Nordea Markets’ FX Sales team in Sweden.
With a steadily growing American export business and roughly 15% of its sales in USD, Finnish furniture company Pohjanmaan Kaluste also needed a worry-free solution for managing its currency risk. The company decided to use a similar layered hedging approach to NewGen.
Danish fashion retailer Ball Group, a European leader in the plus-sized women’s clothing segment with their brand Zizzi, has over 70% of its purchases in USD, and its sales are mostly in DKK, SEK and NOK. A hedging strategy developed together with Nordea back in 2016 has paid off for the company during the volatile times.
On the flipside, these hedging strategies can demand time and resources, which are often limited for many small and mid-sized companies. Nordea’s recently launched AutoFX Hedging tool automates the hedging of FX risk and makes it possible for companies to set criteria for their hedging programs. AutoFX Hedging is available in Sweden, Denmark and Norway.
Swedish mobile phone accessory maker Ideal of Sweden is one company making use of Nordea’s AutoFX currency robot to make more time for what matters – its core business. Discover how AutoFX has helped optimize the company’s processes and minimize manual work and human error.
Read more: 5 steps to manage currency risk
About the survey: SME survey by YouGov on behalf of Nordea Business Banking. More than 400 small and medium sized companies participated in the online poll in the Nordics. Nordea conducted the study to assess the consequences of the currency swings and the financial health of SME’s.
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