Currency fluctuations around Brexit challenge Irish exporters' pockets
With nearly 40pc of Irish food and drink exports heading to the UK, the possible impact of a hard Brexit would be felt by the industry, but it's the day-to-day currency fluctuations that are hitting Irish exporters in the pocket.
However, 61pc of exporters who don't have a strategy plan in place for exports to the UK post Brexit and 68pc are unsure if their supply chain partners are 'Brexit ready'.
Bord Bia's Brexit Barometer found that 44pc of food and drink exporters believe that the UK will not want to restrict imports and for many the current day-to-day impact of currency fluctuations is an ongoing problem.
Sterling has strengthened since June 2016 and if exchange rates were to move towards parity, severe trading difficulties would be created for the industry, Bord Bia says.
It says that an exchange rate of 0.89p would cause severe difficulties for 39pc of respondents while a rate of 90p–94p would cause difficulty for over 80pc.
"Ensuring appropriate risk management tools are in place will help manage future currency fluctuations," Bord Bia CEO Tara McCarthy said.
The Bord Bia research found that while Irish food and drink exporters believe they have reasonably well-developed practices for managing currency risk; however, this belief will be tested in the event of any further devaluation of Sterling.
Companies need to invest in currency risk management strategies for the longer term in order to manage and limit this exposure. It advised the use of natural offsets and currency derivatives to hedge net exposures - consider the type of currency derivatives that can be used for hedging (FX forwards; vanilla currency options).