Managing FX Risk with the Provision of Credit
Hamilton Court has over a decade's experience working alongside public and private institutions as well as corporate entities, providing them with the credit needed to utilise products which mitigate against downside FX risk.
Our dedicated team of professionals help our customers navigate the volatility of the foreign exchange market through utilising a range of products from simple hedging strategies to regulated structured products. Where applicable, Hamilton Court can provide credit lines to enable clients to enter positions without initially posting collateral. In an ever-changing economic landscape which has seen cash flow management become increasingly important, our credit facilities help companies to free up funds for use in other areas of the business.
Our client is a UK based designer, manufacturer, and distributor of high-quality jewellery products with suppliers across North America, Europe and Israel. As such, while its functional currency and revenues are GBP based, their requirement to pay supplier invoices in EUR, USD and ILS mean that it has an underlying need for FX services to mitigate against market risk. Before partnering with Hamilton Court our client was not afforded the services needed to appropriately manage risk. For example, when payments needed to be sent in foreign currencies, they were left to deal in the spot market and had little guidance or support to navigate the risks of this highly volatile market.
Furthermore, the company did not have access to forward contracts to remove the implications of currency fluctuations in between receiving and paying invoices. Hence, since their invoice terms were typically 30 days, our client’s profitability could be jeopardised following any downside moves within this period. It was not lost on our client that given their industry’s tight margins, a downside move of 7.8% on GBPEUR in the space of a month (as was seen in June 2016) would pose a significant risk to their bottom line.
Introduction to Hamilton Court
Given the complex role that foreign exchange plays in their operations, we recognised that effective management of their exposure was of the utmost importance. Over the course of several face-to-face meetings, we took the time to understand their specific needs, processes, and pinch points. Investing this time enabled us to work on a solution which fit their needs, aligned with their existing treasury function, and demonstrated clear value.
Providing Solutions: Our Client’s Partnership With Hamilton Court
Managing FX Risk with the Provision of Credit
The fast-moving nature of the retail sector meant that our client put great value on maximising liquidity. Thus, we wanted to help free up capital wherever possible as we understood that a changing economic landscape characterised by the pandemic, supply chain issues and the rising credit costs has only underscored the need for practical cashflow management.
Productive dialogue allowed Hamilton Court’s in-house credit team to provide a credit line which enabled them to mitigate against downside risk without the requirement to post initial collateral which would otherwise be detrimental to their cashflow. As such, our client’s liquidity was greatly improved with the freeing up of funds through a credit line, helping their business to continue to grow.
Outstanding Service
Our client continues to be supported in the knowledge that their dedicated account manager always remains on hand to execute trades, ensure timely payments, and provide them with the latest in fundamental data, technical analysis and reporting requirements. Our round-the-clock trading desk and in-house settlements team also ensures that our client can benefit from making payments to every corner of the globe in over one hundred currencies. Whether our client is making first-party payments for cashflow requirements, or third-party payments to meet invoices, our in-house settlements team continues to work tirelessly to ensure funds are sent safely and securely to all corners of the globe.
They also take comfort in the knowledge that Hamilton Court’s extensive panel of liquidity partners provide competitive in pricing and offering liquidity in over one hundred currencies across major, minor, and exotic pairs.
Conclusion
Hamilton Court is proud to continue to grow in partnership with our client, providing them with market leading service and risk management solutions. The provision of a credit line has proved pivotal in our client’s ability to utilise forward contracts which have enabled them to mitigate against downside risk that could otherwise jeopardise their profitability. The credit line has also helped to improve liquidity across their business, enabling them to use the freed-up cash flow to invest and grow. Our credit offerings are just one of ways in which Hamilton Court continues to help companies to grow and we look forward to a long-standing relationship with our client who we have helped in this way.
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