European nongovernmental organizations and charities need to be more proactive at managing their foreign exchange risk and cut transaction costs in order to stretch their budgets further and become more sustainable.
That’s according to Beverley Traynor, head of business development for charities at London-based financial services provider Ebury. To do this, Traynor said nonprofits need to change their culture and hire more managers with a finance background who stay abreast of advances in financial services and tools.
In 2009, a Stamp Out Poverty report titled “Missing Millions” claimed U.K. charities were losing between 20 million and 50 million pounds ($32 million and $80 million) each year by relying on banks for their foreign exchange, or FX, needs. Misleading transfer fees and uncompetitive rates were to blame, according to the report. Five years on, it is still a major problem across Europe, but Traynor said it is one that can now be easily fixed.
On-the-ground exchange offers unfavorable rates
Many European charities and NGOs focus their work on emerging markets or areas of conflict through on-the-ground operations or direct aid. These countries’ currencies can be difficult for organizations to buy at home via their regular banks and even some brokers. They also tend to be very volatile, with unpredictable moves in exchange rates against the pounds sterling or euros that such charities are typically funded in.