Like many industries, the sporting industry has become heavily globalised at every level, with almost all sports receiving a measure of interest from international organisations. Whether it's an international sporting body like Formula One or a national league like the Premier League, there are almost always international components to sports businesses – prize money for international tournaments, overseas media and image rights, international tours, or salaries for staff and athletes in different countries.
The issue of foreign exchange exposure affects sporting organisations of all shapes and sizes, and there are several ways in which sports clubs' profit margins can be affected by FX movements and the value received from international payments. The costs of international fixtures and events are also subject to currency market fluctuations, and the prevailing exchange rate and value that clubs receive when settling costs or receiving payments can significantly impact profit margins.
With global payment solutions for international businesses, in addition to strategies for currency risk management, Moneycorp works to provide effective FX solutions across the sports industry. We can help our clients manage their international payments across various reasons for transfer, helping them manage their currency exposure, however complex the business is.
When you’re exchanging large amounts of money; a small difference in rate can make a big impact. There are two things you need to consider when considering exchange rates for international transactions, exchange variance and fluctuations.
The variance between GBP/EUR exchange rates across the market can be as much as 4.5%, and with more exotic currencies, it can be as high as 8%. The real-term impact is significant when your business's international payment requirements start moving into millions of pounds.
With transfer fees easily reaching upwards of £45M for top-tier players in football, that's a difference of over £2M. Even in lower leagues, where transfers can still cost over £1M, a poor exchange rate can cost £45,000.
Similarly, fluctuations in exchange rates over time can significantly affect costs. In 2022, the GBP/EUR rate fluctuated between 1.2188 and 1.0843, a difference of 12.4%. For sports clubs and teams that operate globally, that could mean a 12.4% difference in profit margins.
At Moneycorp, we can source the most competitive rates from our panel of 16 liquidity providers, but many banks simply added a fixed percentage onto the interbank rate.
The impact of these fluctuations is present all the time in business, for example, when you raise invoices in foreign currencies. Ideally, they would all be paid within thirty days, but sometimes it can stretch over months. If there's been a big swing in the exchange rates during that time, it can have a meaningful effect on the trade - whether it eats into your profit margin or swallows it up completely.
To mitigate this kind of risk, your organisation can explore using currency tools which can help you to hedge invoice rates for future payments, protecting you against volatility.
It's also essential to watch out for hidden costs – some foreign exchange providers charge you to open a corporate account and hold various currencies, while others charge fixed fees on transfers.
Compare the fee structure against your foreign exchange needs, as different providers will work better for your business. On top of that, if you receive multiple currencies, ensure you have an account supporting that. It's easy to incur charges and fees inadvertently when you receive different currencies into your UK bank account – and once it's done, it isn't easy to do anything about it.
With an account that holds multiple currencies, you avoid these fees. It's an easy move to cut costs, and we've seen clients save over $10,000 a year simply by opening a multi-currency account with us.
FX experts work with you to understand your exposure and suggest the most appropriate currency tools that will enable you to save money on your exchange transactions. The overall objective for currency hedging is risk management, working almost like an insurance policy – you might not need it, but you'll be very glad it's there if you do. An experienced currency management professional can execute your risk management strategy in line with your risk appetite and investment objectives.
However, we'll take a much more granular approach to suit your business needs when building an FX strategy. When we start a trading strategy from scratch, we always advocate starting with
We provide technical analysis from up to 12 months of data, including the times and dates of your transactions, the exchange rates, the type of products your business uses, and what currencies you trade, to help paint a clear picture of your foreign exchange requirements and give you an understanding of your risk exposure. Once we’ve built a profile of your business, we’ll start looking at what tools we can leverage to help you.
are an agreement to buy an amount of currency on or before an agreed date; they allow you to secure an exchange rate for future transactions. They can help protect you from unfavourable market movements and allow you greater control and visibility of your budget and cash flow without worrying about FX volatility.
This is the most straightforward contract for foreign currency trading. The price is quoted and booked for immediate delivery. This method is often used to make a one-off smaller payment or when you have a limited timeframe to make the payment. are the most common and traditional form of currency exchange, and typically, the trade will be settled within two days so that it can protect you against short-term market fluctuations.
These allow you to set up a target rate at which you are willing to complete a transaction. It is a great tool when you are optimistic that the exchange rate might improve. They can be used in conjunction with 'Stop loss orders', which help protect your transaction from going below a specific rate if the market moves against you.
Foreign exchange options sit somewhere between forward contracts and spot contracts. These tools give you the right, but not the obligation, to buy or sell a currency pair at a specified exchange rate within a specific time frame. FX options are highly customisable and allow you to hedge your currency risk while still being able to take advantage of favourable currency movements.
*Forward contracts may require a deposit
**FX options are regulated products only suitable for businesses with specific requirements
Be aware of currency risk. None of the information contained in this article constitutes, nor should be construed as financial advice. TTT Moneycorp Limited (company number 738837) is registered in England. Its registered office is at Floor 5, Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ. Moneycorp is a trading name of TTT Moneycorp Limited which is authorised and regulated by the Financial Conduct Authority for the provision of payment services (firm reference number 308919).