New research reveals that corporates suffer from a lack of transparency in FX

The latest report in Chatsworth client MillTechFX’s global research report reveals a lack of transparency in FX is a real issue for corporates in the UK.

A new report from FX-as-a-Service pioneer, MillTechFX, has revealed that 62% of UK corporates surveyed believe there is a lack of transparency in the FX market, with many relying on just one or two counterparties for their FX trading.

The report entitled ‘MillTechFX UK CFO FX Report 2023: The intensifying FX challenges for corporates’ is part of MillTechFX’s global research series which aims to provide a window into how corporates across the globe are adapting their FX risk management practices and their priorities to stay ahead of the curve.

It found that one of the key reasons for this lack of transparency is the difficulty that corporates face in comparing prices when executing trades. Corporates are often beholden to limited sources of liquidity as it can be challenging for them to set up relationships with multiple banks. On average, UK corporates only have three FX counterparties while just 1% of the surveyed UK corporates have five or more FX counterparties. 

Although FX volatility has decreased since peaking towards the end of 2022, currency movements are still having a significant impact on corporates, with 69% of those surveyed stating that their bottom lines were affected by GBP volatility. A slim majority (52%) of corporates experienced decreased FX risk in the past six months, while 33% experienced increased risk.

Corporates are adapting their hedging strategies to the relatively calmer environment and the proportion hedging their currency risk fell from 89% in 2022 to 70% in 2023. Of those that don’t hedge, 67% are now considering doing so, compared to 89% last year. The average hedge ratio dropped from 50-59% in 2022 to 40-49% in 2023 based on last year’s survey results.

Even though there is widespread acceptance that volatility has dropped in recent times, many CFOs and treasurers are still prioritising risk management with 41% planning to increase their hedge ratio, and 40% preparing to increase their hedge windows in the year ahead.

The majority of corporates (75%) are looking into new technology and platforms to automate their FX operations and move away from manual legacy systems. The key driver behind automation is cost savings (31%), followed by eliminating silos (29%), operational risk reduction (28%) and simplicity (25%).

Other findings include:

Counterparty diversity – Following the recent crisis at Silicon Valley Bank, Credit Suisse, First Republic and Signature Bank, 73% of UK corporates are now looking to diversify their FX counterparties. 

Operational challenges – The most challenging aspect of corporates’ FX operations is demonstrating best execution (38%), followed by manual processes (32%), onboarding liquidity providers (31%), execution (29%) and getting comparative quotes (28%).

ESG continues to rise in importance – 85% said that ESG credentials affect their selected FX counterparties. Interestingly, 77% of larger corporates said ESG has grown in importance compared to 69% of the smaller corporates, perhaps showing larger firms are taking the lead on the ESG front.

Eric Huttman, CEO at MillTechFX, commented: “Despite the relative calming of currency volatility over the past six months, it is clear that senior finance decision-makers at corporates are still struggling when it comes to FX due to a lack of transparency. FX costs are typically hidden in the spread and the best rates are reserved for institutions that transact the highest volumes.

“Corporates also tend to only work with a small number of banks for their FX hedging. It can take months, even years, to set up banking relationships and our research shows the majority only work with three banks. This makes it harder for them to compare prices in the market because they have fewer access points. As the recent banking crisis demonstrated, reliance on a small pool of counterparties can be a serious risk.

“It is therefore positive to see that most corporates are looking to diversify their FX counterparties. This is not only beneficial from a risk management perspective but has the added benefit of providing corporates with the ability to compare prices, aiding transparency and enabling best execution. Embracing digitisation can also help strengthen transparency, with most corporates now exploring new technology as they seek to cut costs, eliminate silos and enhance operational efficiency. 

“The rise in ESG as a key priority is more than just box-ticking. Stakeholders including shareholders, clients and employees are demanding progress in this critical area. Many of our clients now ask about our own ESG practices before deciding to work with us, and our research shows that over a third actually mandate that their counterparties have strong ESG credentials. It’s important to our clients, and it’s important to us. 

“Looking ahead to the rest of 2023 and beyond, we would encourage corporates to gain a transparent view of their FX execution, expand beyond their traditional banking relationships in favour of tech-enabled solutions and implement a carefully thought-out risk management strategy to protect their bottom lines during these uncertain times.”

To learn more about the FX challenges facing corporates as well as the solutions they are implementing, read the full report here:


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