We have all seen the recent and almost daily media reporting on the impact to the UK on the gradual erosion of Sterling’s strength, which has been a particularly spectacular fall from grace in recent months since the Brexit vote.
Like all currency fluctuations there are winners and losers. UK consumers took an instant hit when converting their pounds to euros before they hit the beaches across Europe whilst exporting UK businesses are enjoying the benefits of an upturn in international sales because of a weaker pound.
So what about your business?
Many UK businesses will likely hedge their currency risks when buying or selling your goods/services, which will afford them some protection against losses. But have you considered the potential impact to your operations and valuations?
In 2016 alone, Sterling is -16% against the USDollar and -18% against the Euro. It’s also worth noting the Euro was up as much as +6% against the pound in November 2015 so in the last 12 months we have seen a -24% swing in the devaluation of Sterling vs Euro.
Why is this so important for you and your business to consider?
Up to date valuations are critical for your insurance programme as many businesses just like yours will have an Average Clause. This clause, if triggered, will reduce the amount you receive in the event of a claim by the percentage you are undervalued by. So, for example, if your business has valued assets at £1 million but replacing them from international markets actually now costs £1.2 million you would receive 20% less ON EVERY CLAIM.
Equally if our clients have assets overseas that are sourced and supplied via a Sterling balance sheet, we are strongly recommending they challenge their business to act now before a potential, unpredicted major incident occurs. By doing so they can ensure the required resilience is in place on their balance sheet to fund any shortfall.
What is clear is these are challenging, highly competitive and unpredictable times. Any disruption to the productivity of your business, your customers or suppliers could have a disproportionate effect on your business continuity.
At Griffiths & Armour we work closely with all of our clients to understand the unique challenges facing their business, including the challenges faced by their customers, consumers and supply chains. If you have any questions on this article or would like us to contact you to assist your business, please do not hesitate to contact Troy Johnson directly to see how we can support you.