KUALA LUMPUR (Sept 19): Businesses approach to currency risk management varies significantly worldwide, according to a new research from market analysts East & Partners (E&P) released today.

In a statement, E&P said the research, derived from interviews with 13,000 importers and exporters across ten countries, highlights emerging foreign exchange (FX) risk management trends, broker performance and receptiveness to digital innovation.

“Citing a lack of knowledge, experience, and product understanding, small businesses universally continue to undermanage their exposure to currency volatility, however that trend is slowly changing,” it said.

E&P said that in both micro and small to medium enterprises (SME) segments, Asia based businesses engage with Options and Forwards at higher rate, 28% and 34% respectively, than most of their global counterparts.

It said the increased engagement, particularly among Lower Corporates which is approaching near universal uptake, has led to an increasingly fragmented business FX market as banks battle with newer providers for market and wallet share.

Previous rounds of E&P’s research has found that businesses are increasingly chasing the best value available, or “multi-banking” their FX needs, consequently decreasing wallet share per FX provider.

“Although falling wallet share trends have been sustained worldwide in 2016, it is clear advances made by non-bank FX providers have been halted as banks respond to the challenge with sophisticated multiproduct platforms and improved service propositions,” it said.

E&P Australia head of markets analysis Martin Smith said Australian businesses were carrying greater currency exposure as their import and export volumes grow, yet they are not nearly as savvy in managing FX their currency risk volatility with Forwards or Options compared to their global peers.

“As the Australian dollar approaches one-year highs against the greenback, internationally trading firms need to be more attuned to the risks they are facing. Minor fluctuations quickly erode margins, impacting cash flow and their bottom line.”

Meanwhile, E&P Asia head Amit Alok said that from speaking businesses based in Hong Kong, Singapore, Malaysia or the Philippines, it was clear the high level of cross border trade, multicurrency cash management and increasing usage of regional treasury centres is driving greater usage of Forwards and Options.

“The latest round of research reveals surprising currency trading volume forecasts but most importantly confirms businesses in the Asia region are moving away from a reactive stance to FX market volatility and instead removing the potential downsides from dealing in unpredictable FX markets at relatively low cost,” said Alok.