Ellie Allen

Hedging for Success - Introducing ARCH

2 min read


Opening an account with Currency Solutions is completely free and you’ll be able to make currency transfers anytime at our excellent exchange rates.

Are you importing or exporting goods in a market hampered by tight profit margins?

Do you need to take more control of your bottom line?

How can you ensure a profitable product price when the cost price varies?

Volatile currency markets can have a huge impact on your profits.

Let say that you set a 2021 price for a product, bought in USD including a 5% profit margin, based on the exchange rate when the pound was strongest. When the pound weakened, your profit margin would soon erode, and leave you with -2.5% profit - based on the same price, from stock bought at the dollar’s peak. This fluctuation in price could force you to either absorb the loss or increase your prices, with the knock-on effect of untenable prices in your already competitive market.

You need to take control of your risk.

The idea of hedging or creating a risk management strategy to help protect your profits can seem daunting and time consuming.

That’s where ARCH comes in - an automated technological solution to hedging. ARCH will save you all the time and stress of having to regularly check exchange rates and juggle a myriad of spreadsheets and formulas. ARCH holds all your businesses information, together with up -to-date exchange rates, allowing you to easily work out the right FX Policy for you.

How does it work?

Firstly, you’ll just need to answer a few questions – ARCH will take a number of factors into consideration when helping to devise your strategy; how tight your profit margins are, how frequently you’re able to increase your prices, whether you’re currently hedging. This is all designed to help you quantify your current exposure.

We’ll need to know what currencies you think you’ll need, over what time period, and in what quantities. This can be based on forecast projections or committed spend already in your accountancy system but not yet due for payment.

Then, ARCH will get to work.

With all your information plugged into the platform ARCH can now help you to devise an FX Policy that will give you control of your bottom line.

Even the most accomplished economist cannot predict exactly what will happen in the currency markets during a given year, whether currencies will move for or against you. So, ARCH allows you to easily see the impact of market movements to your bottom line based on a variety of scenarios. Don’t worry if you’re unsure where to start, our currency experts will be able to give you guidance on the historical movements of the currencies you need to buy.

You’ll be able to test out different strategies at the click of the button and see whether a full or partial hedge is the best solution for your business. You can also consider whether a tapered or constant hedge is a better fit. Your account manager will be on hand to talk through your options with you in detail. ARCH will show you your risk exposure, as well as the best-case scenarios and worst-case scenarios based on the chosen rate variance. Once you’ve decided on your FX Policy, this can easily be exported from ARCH for your records.

Put your FX Policy into action

Once you’re happy with your policy, you can start executing your strategy through ARCH. The platform allows you to add beneficiaries and facilitate transfers, with the ability to create different levels of authorisation. Transfers can be automatically generated in line with your FX Policy, or if you prefer, you can manually generate trades. The platform isn’t only for hedging products either, you can also use it for Spot transfers.

Final thoughts

Opening an account with Currency Solutions is completely free and you’ll be able to make currency transfers anytime at our excellent exchange rates.

We appreciate that navigating the currency market can be daunting! So, a dedicated account manager will always be on hand to offer guidance.