One in three small or medium sized accountancy practices (SMPs) have small and medium sized (SME) clients with exposures to foreign exchange risk, says a new report from ACCA (the Association of Chartered Certified Accountants), yet fewer than a quarter of those take an active role in helping their SME clients manage FX risk.
ACCA’s report drew on data from a 2013 global survey of 1,350 SMPs, most of them in South Africa, Romania, Turkey, the UK and Ireland. The survey found that 71% of these small practices had SME clients with at least some international activities, and 17% earned more than a quarter of their income from internationalised SMEs. In some countries strongly exposed to international finance, the percentage of SMPs heavily dependent on internationalised SMEs was much higher – in Romania, for instance, it rose to more than half.
Emmanouil Schizas, ACCA senior economic analyst, said: 'Fluctuating exchange rates can leave SMEs out of pocket if their revenues and costs are in different currencies, and could prove particularly damaging for SMEs with debt denominated in foreign currencies. It makes sense for them to seek advice, and for their financial advisers to take an interest.'
An earlier report by ACCA and peer-to-peer FX hedging platform Kantox, released in April, found that FX exposures at SMEs and mid-market companies were significant (at a typical 19% of revenue). Yet, the typical business barely hedged half of this exposure, and many had no protection at all.
Based on figures from its widely-cited Global Economic Conditions Survey, ACCA believes that practitioners are most aware of FX risk in parts of the world where major fluctuations make regular headlines, or regions where a lot of foreign-denominated trade and financing takes place, such as the Middle East or Central and Eastern Europe.
In other parts of the world, however, SMPs’ awareness was lower. While it was relatively easy for SMPs to become involved in managing client transactions in foreign currencies, it took a ‘critical mass’ of FX-exposed clients (or a small number of critically exposed ones) to convince practitioners to invest resources in advising clients on managing foreign currency risk.
The ACCA’s analysis demonstrated that practitioners with a strong network of professional contacts, especially overseas, tended to be more proactive in advising clients on how they manage FX exposures. Those who did tended to be particularly motivated to build their brands around successfully internationalised clients.
Emmanouil Schizas added: 'Overall, SMEs with international ambitions tend to grow faster and generate more profits, as well as greater demand for professional advice. Practitioners who invest in providing such businesses with relevant advice and services have a lot to gain in return – not just in countries where foreign exchange rate volatility can threaten businesses’ survival, but everywhere and as a matter of course.'
For more information, please contact
Steve Rudaini, ACCA Newsroom
+ 44 (0) 207 059 5622
+44 (0) 7801 133985
Helen Thompson, ACCA Newsroom
+44 (0)20 7059 5759
+44 (0)7725 498654
Notes to Editors
- Full survey findings can be found in the ACCA Accountants for Small Business report SMEs and foreign exchange risk: are small and medium-sized accountancy practices up to speed?
- Other reports referred to include the ACCA and Kantox report Hedging FX Risk: Taking stock of the challenge for mid-caps and SMEs and the Edinburgh Group study Growing the global economy through SMEs
- At the beginning of 2013, the Edinburgh Group, a coalition of 14 accountancy bodies around the world created to champion small and medium-sized enterprises (SMEs) and small and medium-sized accountancy practices (SMPs), commissioned a substantial survey among its members. The aim of the survey was to find out more about the extent of international activity among SMPs’ clients, the challenges those SMEs face in developing themselves internationally, the support available to SMEs and any further assistance governments could provide. A total of 1,350 SMPs from over 70 countries on all continents were surveyed, with the strongest responses received from South Africa (24.1%), the UK (21.6%) and the Republic of Ireland (16.8%); and adequate samples also received from Romania 6.9%) and Turkey (4.6%). Headline findings from this research were published by the Edinburgh Group in June 2013 under the title, Growing the Global Economy Through SMEs (Edinburgh Group 2013).
- ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.
- We support our 162,000 members and 428,000 students in 173 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. We work through a network of over 89 offices and centres and more than 8,500 Approved Employers worldwide, who provide high standards of employee learning and development. Through our public interest remit, we promote appropriate regulation of accounting and conduct relevant research to ensure accountancy continues to grow in reputation and influence.
- Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. We believe that accountants bring value to economies in all stages of development and seek to develop capacity in the profession and encourage the adoption of global standards. Our values are aligned to the needs of employers in all sectors and we ensure that through our qualifications, we prepare accountants for business. We seek to open up the profession to people of all backgrounds and remove artificial barriers, innovating our qualifications and delivery to meet the diverse needs of trainee professionals and their employers.