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How successful CFOs help their businesses manage international growth

Lessons from working with ambitious global companies, big and small - by Alex Axentiev.

As companies expand and venture into international markets, they encounter a host of challenges. From navigating foreign payments and managing currency risk to optimising cash flow, these complexities can hinder growth and profitability. 
 
In this blog article, we will explore the common obstacles faced by finance teams in international business and discuss innovative solutions to overcome them. 
 

SIMPLIFYING INTERNATIONAL PAYMENTS

One of the first things that finance teams must figure out when doing business internationally is how to pay or collect in foreign markets. Do they need to open accounts in several countries? How to do it? And how to operate them with the required controls and visibility? Traditional methods such as SWIFT transfers or checks, are time-consuming, costly and prone to errors.
 
So, what can you do in order to support your business growing internationally while keeping things simple, safe and cost-effective?
 
Today you can open a single account with one of the fintech providers that can support most of your business needs without bringing the complexity of maintaining accounts in multiple banks. A single account can give you a set of addressable bank requisites, where you can get paid via local payment schemes such as Faster Payments in the UK, SEPA in Europe or ACH in the US. This will save you both time and money in terms of paying or collecting from your suppliers and buyers and keeping working capital efficient. The same account can also help you pay or collect via SWIFT without the expensive fees that incumbent banks charge.
 
 

AVOID A CHESS MATE FROM CURRENCY RISKS 

Cash flow, liquidity management and hedging have been increasing in importance for CFOs, and if you have a board or VC investors, you can expect the same questions as you grow. 

 CFO Perspective
Source: HSBC's Corporate Treasury Risk Management Survey 2021
 
Our advice? Never wait until FX becomes a recurring discussion with the board. It is a prime sign that you need at least a basic policy in place to align everyone and avoid future frustrations.
 
In fact, one of the most popular reasons CFOs turn to HedgeFlows is when they have to explain the impact of foreign currencies on their bottom line to their CEOs or are facing the challenge of formulating proposals on how to manage these currency risks to the board. There are many uncertainties businesses face, and many are are hard to quantify and avoid. FX is not one of them. Having a clear understanding of the potential currency risks and developing effective hedging strategies is essential. 
 
 

CASE STUDY: MOOTEEFE'S TRANSFORMATION

To illustrate the benefits of modernising payment processes, let's look at the example of Moteefe, a fast growing e-commerce platform operating globally. Before adopting HedgeFlows, Moteefe faced manual, error-prone payment procedures involving multiple banks and lengthy reconciliations. By centralising their payment operations with HedgeFlows, Moteefe's finance team experienced significant time savings, reduced errors and streamlined processes. They could review and prepare payables, schedule payments in advance, automate currency conversions, and reconcile transactions seamlessly. The result was enhance efficiency, improved financial control, and increased accuracy in international payments.

 

DEVELOPING A CURRENCY RISK MANAGEMENT STRATEGY

CFOs must proactively address currency risk and develop a robust strategy aligned with the company's objectives. This includes

  • Determining realistic budget rates
  • Estimating potential impacts of FX uncertainty
  • Establishing risk tolerance
  • Creating a process to monitor and mitigate risks

Collaborating with a fintech partner like HedgeFlows can provide valuable guidance and technology-driven solutions to support effective risk management. By implementing a comprehensive strategy, companies can safeguard their financial performance, earn investor trust, and ensure long-term sustainability.

 

DEBUNKING HEDGING MYTHS

There are common misconceptions around hedging, such as believing that high-margin companies do not require hedging. However, even profitable organizations like Apple and Microsoft actively hedge their currency risks due to unique factors influencing their business models. Understanding the nuances of hedging strategies tailored to a company's specific circumstances in essential. With comprehensive visibility into forecasted cash flows and robust frameworks, companies can make informed hedging decisions that align with their risk tolerance, market conditions, and long-term objectives. By debunking these myths and embracing hedging as a proactive risk management tool, businesses can protect their profitability, mitigate potential losses, and navigate volatile currency markets with confidence.

International business operations come with inherent challenges, particularly in the realms of payments, currency risks and cash flow management. However, by leveraging modern fintech solutions, companies can streamline their operations, enhance financial visibility and optimise their global performance. 

If you would like to learn more about HedgeFlows and how our platform can help you plan and manage your businesses' international growth  get in touch!
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