A new report reveals just how much UK charities are losing out as a result of currency volatility and high transaction costs.
The INGO FX Insights Report 2021 has been published by CFG members Charitytransfers.org and Crowe. It reflects insight from over 100 internationally operating UK-based charities and the findings highlight big gaps for those in this sector to address:
- 55% of survey respondents name FX volatility as a major challenge, and 63% believe a FX market movement between 0% and 10% would cause them financial difficulty
- 43% indicated the primary method for dealing with volatility was by absorbing any negative movements using unrestricted funding
- 81% of INGOs believe access to a tool that accurately measured the cost of their foreign exchange payments would be useful
- 71% of respondents submitted that they had no official foreign exchange policy. Lack of internal resources, insufficient knowledge and a lack of prioritization being cited for the main reasons.
Curtis Noble, Head of CSR at Charitytransfers.org.uk says:
“The INGO FX Insights Report is the first of its kind, highlighting that many UK charities who rely on cross border payments to provide support overseas would benefit from overhauling their current FX arrangements.
"Charitytransfers.org was set up with the sole purpose of making sure charities can enjoy access to independent and impartial FX advisory services, to ultimately ensure donations and resources reach those who need it. Experience has taught us that charities can save up to 50% per year if they get their FX function set up right. With funding cuts to the charity sector, every INGO should sit up and take note of the findings of this report to understand where improvements can be made to this critical area of their finance function.”
Charitytransfers.org highlights three questions that charities should be asking internally:
- Do we know exactly how much it costs to send or receive funds from overseas?
- Which currency is being spent locally by overseas partners and which is the most cost-efficient route to sending them funds?
- Are we adopting suitable risk mitigation strategies, and can we accurately audit the costs involved of using such hedging products?
Naziar Hashemi, National Head of Social Purpose and Non-Profit Organisations, Crowe UK says:
“Foreign exchange has always been a difficult issue for INGOs to grapple with. Some INGOs are lucky enough to have sophisticated treasury functions, but for all, managing the risks from FX is critical especially during these volatile and uncertain times.
"As demonstrated through the results of the survey, many lack the resources and expertise to develop their own FX policy and those that do are often overtaken by higher priority tasks. Many are hampered by the administrative and regulatory burdens of remitting funds overseas. We often see INGOs who bear the costs of FX through their unrestricted funds, due to funder rules and budgeting processes. There is a perceived lack of competition when making transfers and a lack of transparency on charges. These challenges make it more pertinent for INGOs to explore their options for better FX management.”
Download and read the report
Key features of the report:
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- Findings based on survey submissions of 114 INGOs
- Highlights common issues and pitfalls and provide information on how improvements can be made
- Developed by Charitytransfers.org, with the analytics collaboration of Crowe U.K. LLP.