The rise of geopolitical themes such as trade wars, and the growing influence of political figures on financial markets, has significantly increased the complexity around judging future market trends and their implications for international business. COVID-19, however, brought a whole new dimension to global markets.

The pandemic has triggered a broad and rapid disruption to economies, business operations, technology, and infrastructure worldwide. Regardless of size or sector, business leaders have had to respond to the “Great Lockdown” crisis at an unprecedented scale, whilst dealing with levels of sales uncertainty, currency volatility, and cash flow risks previously unseen.

Exchange rate volatility particularly will be brought into the forefront as we look ahead towards 2021, given it has a vast impact on the profitability of international trade in goods and services.

To better appreciate this shift in dynamic, one index measure of economic policy uncertainty showed that index levels in August 2020 were 52% higher when compared to this time last year.1 Furthermore, measures of anticipated currency volatility rose from record lows in January to an 8-year high by March and remain elevated .2

As companies now transition into the ‘new normal’ and re-structure plans for 2021, the risks to financial objectives from economic and currency fluctuations remain acute. Yet future scenario testing and subsequent risk analysis remains an incredible challenge for many companies, especially SMEs.

For importers that rely on sourcing from abroad or exporters of services, swings in currencies can make or break profits. Despite this, numerous studies, including our FX Barometer Report, continue to uncover that companies from manufacturers to charities still do not fully understand or have the resources to sufficiently hedge this risk and protect profits. Better access to technology, information and expertise are still needed here.

In our report ‘Are You Ready for 2021?’ – the latest edition of our annual guide for companies navigating volatility and scenario planning, we uncover the key market trends and events set to reshape financial markets and currencies.

 

 

© 2020 Western Union Holdings Inc. All rights reserved.

Western Union Business Solutions is a business unit of The Western Union Company. Services in Malta are provided by Western Union Business Solutions (Malta) Limited, a limited company registered in Malta (Company Number C22339) with its registered office at W Business Centre, Level 5, Triq Dun Karm, Birkirkara By-Pass, Birkirkara, BKR 9033, Malta and which is licensed and regulated by the Malta Financial Services Authority to undertake the business of a financial services in terms of the Financial Institutions Act) (“Western Union Business Solutions“).

This article has been prepared solely for informational purposes and does not in any way create any binding obligations on either party. Relations between you and Western Union Business Solutions shall be governed by the applicable terms and conditions. No representations, warranties or conditions of any kind, express or implied, are made in this brochure.

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