06 Jul 2012 | Stuart Pickles, AimHigherLeadership.com
IN THE WESTERN WORLD, most of us believe democracy is a better model for leadership than dictatorship. But in the UK with the recent jubilee celebrations, we can see there is strong support for a very undemocratic leader - the Queen! And in our day to day business lives, we do not live in a democracy either.
As leaders in business, we are not voted in by our people either - we do not have a mandate from them - we get our mandate from our bosses, and they appoint based on getting results, not on the support we have from our people. This doesn't mean business leaders are dictators, although at its extremes we know it is open to abuse - most of us have seen behaviour from business leaders which is not that different eg. bullying and cronyism to protect their position. That's a separate conversation.
Away from those extremes, this democracy analogy throws up three interesting questions in business: What does it mean as a leader to have a mandate from our people? How effective is a leader without a mandate from his/her people? And how do we as leaders go about getting this mandate?
Modern leadership thinking places strong emphasis on empowerment - if leaders empower their people, then they will get engagement and much higher voluntary productivity. Not many would have issue with this, even if it's easier said than done.
However, the question about leadership mandate turns this on its head - leaders need their people to empower them as well.
A mandate from our people empowers us as leaders to operate with freedom to decide and act, knowing people will follow. How much more effective is a leader who knows that people will follow - compared with those leaders we have all come across who are constantly having to go back to their people and either (1) build consensus retrospectively, or (2) just tell them to do it. How much is performance held back by the resulting resistance to change, delay, friction and dysfunctional behaviour that comes from situations where leaders push ahead with an agenda where they do not have the mandate of their people?
How interesting then to reflect on the very un-democratic leadership model of the British monarchy. Opinion polls show that the Queen has more support than our elected politicians. And why? The reasons people gave were her unequivocal sense of service to her people, consistency between her words and her action, and consistency of her words and action over time.
The queen is not elected, but she knows very well that she and the survival of the monarchy relies on an informal mandate from here people - and there can't be many better role models of how to do it well.
People will empower their leaders when they trust them. It's just a matter of being committed to serving your people and being consistent - as well as empowering them. Empowerment is a two-way street.
Stuart Pickles is the former FD of Foster's EMEA. He now runs AimHigherLeadership.com and is blogging regularly for Financial Director
Image credit: Shutterstock
03 Jul 2012 | Mark Thompson, Global Reach Partners
AS WE HEAR perhaps a little too often, the government is keen to keep growth at the front of its business agenda. However, a recent report by the Centre for Business and Economic Research (CEBR) has cast a shadow over these plans, suggesting the UK will struggle to grow in any meaningful way over the next few years. This is due to predictions of inflation remaining high. As well as this, the move higher in the £/€ rate has put the dampeners on hopes for increased sales into the UK's largest export market. Europe is where around 50% of UK exports touch down.
It doesn't take a genius to realise the majority of households and businesses will have experienced squeezed finances and negative growth over the past few years; a direct result of consumer goods prices rising alongside falling incomes. Stagflation, as this scenario is called, presents a unique dilemma for central banks and governments. With their dual remit to tackle inflation and stimulate growth their nightmare scenario is to be presented with neither.
In a stagflationary environment the Bank of England and government would be forced to make stark choices; either to loosen monetary policy in an attempt to tackle the lack of growth through quantitative easing or rate reduction; or to hike interest rates. Doing this in a negative growth environment is necessary to prevent inflation from running out of control, but can have a further dramatic effect on growth, and not in a good way. Each of these outcomes would have a direct impact on UK business and the predicament facing financial directors.
It would however, be wise to look at the bigger picture before any business struggling to hits its target figures starts to develop its performance excuse plan. The situation elsewhere is not quite so dramatic. In fact the latest PMI (Purchasing Managers Index) figures for the UK show a different picture to that presented by the CEBR. Compared to the tales of double dip recession that followed our latest GDP release, the figures, which measure activity on the private sector, were more cheery.
The good news is that for now, the private sector is growing in the UK; helped in part by the recent strengthening of Sterling; this has led to slower growth in raw material prices. Despite this, the Bank of England and the Government remain anxious about the outlook for UK growth. A sentiment echoed by MPC "über-dove" Adam Posen who as recently as last week voiced his regret that he overestimated the UK's ability to recover against a backdrop of slowing global growth and a worsening debt crisis in Europe. For now the recent data is not supporting this view. And what of inflation? The current situation is not as bad as you might think. Recent CPI figures have shown a decrease of almost 2% in the annual rate since mid-2011. With the Pound on the rise again, it could be that imports into the UK will continue to cheapen. Stagflation is a threat, and something that all finance directors need to prepare for; particularly as the situation in Europe continues to worsen, but the time to panic is not yet upon us.
Mark Thompson is head of the corporate desk at foreign exchange experts; Global Reach Partners
28 May 2012 | Caron Bradshaw
EARLIER THIS YEAR, CFG, adopted a new name and strapline, ‘Inspiring financial leadership'. For me this means creative, innovative, confident and strong financial management. Easy to aspire to; more difficult to deliver in the absence of the right operating environment for charities. The truth is, many aspects of the regulatory environment need to change, and for this the government needs to take real action on some complex and technical areas.
It's not just the current news headlines of tax and philanthropy, where frustrations are being felt by those of us in the charity sector. Some of the less sexy but equally significant questions also need some serious attention - such as pensions.
‘Pensions' are often the elephant in the room, we all know they're there, but digging under the surface and working out the detail can be terrifying. The problem is that the issues are far more complex and go deeper than you would at first think. Our concerns are not limited to ridding ourselves of pension deficits (although that is one aspect of it). Legislation and regulation in many ways is not fit for purpose if we genuinely want to develop civil society and our public service delivery markets. It is time that the government stopped shying away from tackling some of the glaring inequalities and expressed a commitment to review the difficult issues.
CFG has recently shed light on some of the significant problems for charities part of multi-employer defined benefit pension schemes. Concerns with DB schemes are well known; with an ageing population and rising inflation, the benefits are not keeping in pace with the liabilities - giving rise to massive pension deficits. A major problem, but at least for bigger organisations with their own schemes, one they can manage themselves out of by closing the scheme to new entrants and gradually reducing the deficit.
However, the situation in multi-employer schemes is somewhat different. In an insolvency situation, organisations' liabilities stay on in an ‘orphan pot', which gets distributed amongst everyone else - until there is a ‘last man standing'. Unsurprisingly charities will want to avoid holding the parcel when the music stops, or for any other reason, may want to stop building up benefits in the scheme and cease to have active members. However, that will automatically trigger what is known as Section 75 debt. This is essentially the cessation amount, or the amount to buy-out of the scheme, and is likely to be more than your current liabilities. For many, such a payment would itself lead to insolvency. So charities are faced with no option but to stay in the scheme and continue contributing. Damned if they do and damned if they don't.
The recent high profile Wedgewood Museum case has brought to light what can happen when the ‘last man standing' ends up with a whole heap of pension liability. Having to sell the proverbial family silver (or in this case pottery) to settle the debt.
While the schemes were designed to bring benefits from joint ownership of pension liability this just doesn't work for charities, a point recently acknowledged by the government. And often charities are being put at risk because of shared liabilities with organisations they have no connection with.
Over the years many charities have become part of a number of multi-employer schemes, such as Local Government Pension Schemes (LGPS). It may have made sense or seemed like a good idea at the time. However, as time has moved on the problems have grown in significance and the liabilities ballooned.
A briefing paper prepared for CFG by David Davidson from Spence and Partners highlighted that up to 5,000 charities could be financially hurt by being part of these schemes.
On top of this we have TUPE and Fair Deal legislation - regulations that offer important employee protection. Perhaps justifiable on a philosophical level but when services are contracted to new providers such as charities that are unable to afford the costs problems arise. Charities may end up taking on staff with unaffordable pension contributions where the previous liability transfers with them, or are excluded from tendering for such contracts altogether. Consequently we end up with a market dominated by a number of private sector giants and a few not-for-profits taking on disproportionate risk, which does not deliver the open and varied public service provision the governments' reforms intended. This blocks innovative thinking and creates little in the way of new opportunities.
This is a complex issue that requires a well-considered consultation. The government has no plans to do this in the near future. Nor will they entertain an exemption for charities on grounds they fear changes would put member benefits at risk more widely. We're not advocating an exemption as a solution to the problem. Neither are we asking for a favour because we're charities. Society needs a root and branches review to make the legislation work better overall.
If government don't stop burying their head in the sand, hoping the problem will go away, and look at this issue with a fresh view, it will put thousands of organisations at risk, stifle development of public service markets and eliminate many possible mergers and collaborations. When it comes to LGPS and some other multi-employer pension schemes, the tax-payer bears the ultimate risk of doing nothing. We're ready to work collaboratively with government on this as we know the problem isn't just going to disappear - now we just have to wait to see if they want to work with us.
Caron Bradshaw is chief executive of the Charity Finance Group
25 May 2012 | Eimear Daly, Schneider Foreign Exchange
THE US ECONOMY is staging a recovery. Economic forecasts are around the 2% level for 2012. This compares with the UK and many eurozone economies, which have entered a double-dip recession. Economies are faced with a ruefully ironic predicament: bond market pressures are forcing them to implement fiscal austerity; debt piles must be paid down and fiscal contractionary measures are part of the process. At the same time, their economies have been dealt a demand side shock and a contraction of credit supply. Expansionary policies are needed to correct these effects, but it is extremely difficult to find a balance between contractionary and expansionary policy. America seems to have escaped this predicament. It unapologetically enforced aggressive easing policy with no repercussions from bond markets. The result is ultra low bond yields and an economy on the mend.
It is easy to draw comparisons and suggest the UK should abandon austerity for an indulgent, easy economic policy. But we would be overlooking a huge economic buffer for the US economy - the US dollar is the global reserve currency and dollar-denominated assets, global safe havens. A global reserve currency necessitates running persistent current account deficits. And the US has obliged running a deficit every year since 1982 but one. The global economy needs America to spend more than it saves to provide it with a liquid pool of safe haven assets. If the US Treasury market failed to provide such abundant and liquid debt, the world would be saddled with a lack of safe assets and worldwide credit supply would be hit.
In perverse market mentality, not only do we encourage the US to spend more than it earns, we fund it. In a kind of "reverse aid", demand for foreign exchange reserves forces developing countries to transfer resources to the US. This facilitates financing the US balance of payments deficit. The US receives this financing at very attractive rates, as being the world's global reserve asset means US bond yields stay low. The US actually makes a net interest income as the US treasury rates are often depressed lower than the inflation rate.
A global reserve asset is obviously an enviable position but it is not easily replicated. In 2009, US interest rates were rising. China was one of the main critics of US assets as global safe havens. A building stock of debt undermined the safety of US assets. The easy monetary policy that the US ran to offset the effects of the Global Financial Crisis, was devaluing US dollar-denominated assets. As a result, the Eurozone experienced an unprecedented increase in net bond inflow. Foreigners were buying up sovereign bonds of Euro area countries. The Euro was a likely predecessor to the US dollar as a global reserve asset. The Euro is the second most liquid currency, behind USD. What is more, the central bank was founded on the primary principal of maintaining inflation, with its founding treaty preventing Quantitative Easing. Euro area bonds were viewed as a better alternative to US Treasuries that were seen as too prone to devaluing. Money piled in the Europe's debt markets, but imbalances began to show.
The eurozone is not one single indiscriminate bond market - individual national debt markets do not make the liquidity or the ability for investors to easily enter and exit. Individual bond markets showed up weaknesses in the system as large debt burdens built up on single member states. Had the total debt been supported by the entire economy of the Eurozone, the situation would have been sustainable. The bond market infrastructure wasn't there and the debt markets crumbled. Yields rocketed and locked nations out of funding markets meaning they had to turn to international aid.
US capital markets have powerful advantages over foreign alternatives, with high liquidity, size and transparency. Convention also supports the position of the US dollar as a global reserve asset. Nearly all commodities are priced and settled in USD, leaving emerging nations with large dollar reserves. Many countries manage their currencies against USD and the liabilities of many nations are dollar denominated. America's prominent position as providing military protection and international aid supports its position. The possibility of the Renminbi becoming the next global reserve currency are hindered by China's closed financial account, high saving rates of its citizens and its relatively small bond market. Disregarding the arguments for and against the Renminbi as the next global reserve currency, internationalisation of the currency and the expansion of its bond market will undoubtedly take a long time.
A global reserve currency is not as easy a status to sustain. The underdeveloped structure of the EMU could not handle the influx of capital. If the current crisis forces unification of eurozone bond markets, the Euro could be a contender to the US dollar. But it will take a long time for the eurozone to hold the kind of market confidence required. A global reserve currency also sets a precedent for its citizens to spend more than they save and inevitably leads to an economy that is overweight on consumer demand. This is an economy that is imbalanced and susceptible to internal demand shocks.
There is no immediate need for America to pay down its debt. In fact, America should complete its recovery before it begins to tackle its over-leveraged public sector. This should be a medium to long-term policy that is attuned to the current business cycle. However, America being too big to fail doesn't guarantee immunity. America should act in a defensive mode, begin to stabilise and steadily pay down its debt while promoting expansion of its manufacturing sector and exports. This will protect the US from a shock to consumer demand, pressure in bond markets or a threat to its status as the global reserve currency. Whatever the benefits of being the world reserve asset, it makes it easy for an economy to become over dependent on consumer demand and this must be balanced out.
Eimear Daly is a market analyst at Schneider Foreign Exchange
17 May 2012 | Stuart Pickles, AimHigherLeadership.com
HOW MANY OF YOUR LEADERS and colleagues are really being themselves at work, all the time? And what about you? Or is there some role playing going on? Does it feel like people are wearing masks to disguise their true selves?
We might not like to admit it, but we all wear masks to pretend to be someone or something else. Let's face it, the stakes can be high. Performance at work means reputations are always on the line. Sometimes its lower risk to hide behind a communication that we think other people "want to hear", rather than put our true feelings on the table and risk rejection or failure. This is human nature and something we learn from an early age to survive in our complex social environment.
Why is this important? At the end of the day it's about performance. How much better can we tackle the really tough business challenges when we are connected with each other on a human level, rather than just as "colleagues in roles". How much more easily will we trust each other and take risks on behalf of each other? How does this ultimately impact performance outcomes?
In Japan, they call the mask "Tatemae", which hides the real person, "Honne". For all their recent problems, at the heart of the Japanese economic success story is their cultural focus on relationship building and "getting back to Honne" - there is a lack of tolerance of Tatemae and strong peer pressure to call it out. There is high value placed upon getting to know each other on a deeper level. Common business practices include socialising with work colleagues for long, drunken evenings, and weekends at hot springs where they will bathe naked together - to them even clothes are part of our character costume.
There are 2 challenges with "role play". (i) Acceptance - in some businesses there is total denial that masks are being worn - it can feel a bit like the "Stepford Wives". (ii) Change - how do you make a big shift when these habits are deeply set? Especially when you and the business are under so much pressure.
For both the answer is simple. It's about your leadership behaviour and the quality of conversations that you are having - with yourself as a leader, with your colleagues, and with your business.
1. Your behaviour is determined by how you are feeling inside - how connected you are feeling with your inner self? How much are you challenging yourself on this? How much time are you setting aside to regenerate yourself as a human being, doing the things you love most, to reinforce your sense of self, and remind yourself how important it is to remain true to yourself?
2. How hard are you really challenging each other as a leadership team, and holding each other to account for your behaviour? What quality time and space are you creating for these conversations and this trust building? At work and also beyond?
3. How are you projecting this behaviour and the importance of it to your wider business - what communication and interaction are you creating that will make people feel more comfortable to be themselves?
Of course this is all common sense, but the issue is that most of us are just too busy - as businesses and as individual leaders - and so we don't invest in this time and these conversations. And the mask wearing, roleplaying and sub-optimal performance continue.
It takes serious commitment, time and energy to make this kind of change - there are no "short cuts". But after years of cutting costs and streamlining, more and more leaders and businesses are now looking at this as an opportunity to really leverage their assets and make a step change in their performance and competitiveness.
Stuart Pickles is the former FD of Foster's EMEA. He now runs AimHigherLeadership.com and is blogging regularly for Financial Director
02 May 2012 | Torrie Callander, Global Reach Partners
INVESTORS AND international businesses across the world will be paying close attention to events in Paris on the 6 of May. As the 2012 French elections unfold, socialist opposition candidate François Hollande is looking more and more likely to oust incumbent president Nicolas Sarkozy. This could spell bad news for UK exporters.
A recent opinion poll suggests that 49% of voters feel Sarkozy's campaign is overly right-wing. This could mean that Hollande wins the election with popular support from both the left-wing and centralist voters.
But why is a Presidential election in France so pivotal to British business?
Simply put, Hollande is anti-austerity and this could spell serious trouble for the Euro.
The "would be" president has made very clear that he will not ratify the European austerity package agreed between Sarkozy and German chancellor Angel Merkel. Hollande argues that France needs to focus on public spending to boost growth, and that European nations should follow suit - spelling a major policy shift for the eurozone.
This in itself is not enough to spook financial markets. The best method to fix the debt crisis in the eurozone could be debated forever. It is uncertainty that causes concern.
What the markets want is some clarity over what policy will be adopted, and solid action that is fully supported by eurozone members. This would provide the stability and certainty that investors are looking for. That would provide the stability and certainty that investors constantly seek.
A regime change in France will mean major upheaval for European financial stability, and this is weakening the euro considerably. The single currency has touched 24 month lows against Sterling and is being abandoned by investors across the world. The Swiss National Bank has recently re-aligned its foreign currency reserves away from a long Euro position because of the threat of euro weakness - a move representative of market opinion across the world.
This is great news for UK businesses who are importing from across the Channel as goods become cheaper and profit margins widen.
The opposite is true for UK exporters, and the outlook for them is concerning.
Over 50% of UK exports are purchased by our European neighbors. There is no doubt that our ability to sell to Europe will be hampered by euro weakness. Indeed, this has already been reflected in UK economic data releases. New exporter orders for April posted the steepest fall since 2009 as the eurozone struggles through financial crisis.
Continued weakness of the single currency can only accelerate this further as European businesses and consumers struggle to afford to import goods, or find cheaper alternatives closer to home.
British businesses must remain vigilant for events in Europe. If Hollande does take power in France, exporters will need to sharpen their pencil considerably to remain competitive in Europe.
With the UK government pushing hard for an export led recovery, this is just one more reason for UK exporters to seek alternative markets, while protecting their margins when dealing with the Eurozone through prudent hedging against adverse currency swings.
Torrie Callander is a corporate trader at foreign exchange provider, Global Reach Partners
11 Apr 2012 | Caron Bradshaw
SO THIS year George heralded a Budget that was "unashamedly" backing business. In Richard Crump's article for Financial Director he raises the point that the Budget may have been driven more by politics than by economics. If that is true then then has our political capital diminished as ‘big society' has become damaged goods or simply old hat and slipped further down the agenda? George did little more than give a passing mention to charity - unlike last year which was littered by provisions aimed at supporting a main pillar of the big society project.
It is a significant matter of worry that this year's only reference to charities in the chancellor's speech was rather negative. In the context of cracking down on evasion and excessive "morally repugnant" avoidance, George said it was only right that having capped benefits he should also cap tax reliefs. It appears we've gone back to the old norm of searching the supporting documents to find out how the budget affected the sector - dropping almost entirely out of the speech. And on searching there were a number of proposals relevant to charities; disappointingly many of these sector-specific measures were reiterations of previous government commitments.
With the UK continuing to be gripped in an economic vice the Budget left me feeling it was yes, unashamedly business - but ashamedly not for charity and social causes. Charity could be forgiven for fearing it is being disenfranchised and forgotten as a contributor to the UK's economy.
Pre-Budget CFG highlighted a number of areas where the Treasury should look to improve the operating environment. We called for:
• Improvements to the tax and regulatory framework for charities
• legal structures around multi-employer defined benefit pension schemes to be addressed
• TUPE regulations and Fair Deal to be made to work,
• Correction of VAT and other anomalies which dramatically impact on market diversification.
Whilst the Chancellor pledged to prioritise a fairer, more efficient tax system, he failed to consider charities in this endeavour. As Richard Mannion put it in the aforementioned article, "Osborne was "papering over the cracks", and felt the real problem was "...the sheer complexity of the UK tax system."" I agree.
Osborne caused widespread alarm when he referenced the government's plan to introduce a limit on all uncapped income tax reliefs, including those related to charitable giving. We have joined with NCVO, ACEVO and others in a campaign to exempt charitable giving from this cap. I encourage you to support the "give it back George" campaign because while the text of the document says it will "explore with philanthropists ways to ensure that this measure will not impact significantly on charities that depend on large donations" we have more questions than answers about what effect it will have on the aim - stated elsewhere in Government - of encouraging giving.
This measure could have a devastating effect on major gifts both in reducing the amount given and through tainting the donation with this erroneous link to avoidance and evasion, which I find unhelpful in the extreme.
The government has said that it will work with the charity retail sector to simplify the administration of Gift Aid for charity shops - although does not supply any further detail. Clearly measures that reduce complexity and ease the financial cost of compliance are to be welcomed. But the chancellor missed an opportunity to use technology to overhaul the Gift Aid system which could have potentially yielded more benefit to the sector as a whole.
There was some positive and helpful news with measures to ease the burden on claiming Gift Aid for small donations - increasing the amount from £10 to £20. The total amount of donations of £5,000 remains unchanged.
From April 2013 government will relax the Community Investment Tax Relief (CITR) on-lending requirements, which currently place conditions on the speed with which Community Development Finance Institutions must on-lend the funding they receive. New rules to allow investors to carry unused relief forward will also be introduced. This is a promising development but does not go far enough and will help in only a limited way.
With all the interest on social investment (I have covered the emerging, exciting market in this blog previously) it was surprising that it did not feature more heavily. The development of new and varied funding mechanisms is essential and has been a priority for some time. It is therefore promising that the budget document states that HM Treasury will conduct an internal review on social investment looking in to the financial barriers to social enterprise, but we are keen to see whether government is genuinely nurturing this evolving market and not just paying lip service to it.
The government will withdraw charitable buildings from the scope of the VAT reduced rate for the supply and installation of energy-saving materials. This is clearly a disappointing measure which will not support organisations to be more sustainable in terms of energy use.
As indicated by Danny Alexander at the recent NCVO conference, the Government has pledged £20m of funding for the not-for-profit advice sector in 2013-14, and again in 2014-15, to ‘support the sector as it adapts to changes in the way that it is funded'.
Government reiterated its commitments to provide a lower rate of inheritance tax, provide reductions in tax liability for donations of pre-eminent objects are made to the nation, amend Community Amateur Sports Clubs legislation, withdraw Self-Assessment Donate for tax returns 2011-12 onwards, introduce the VAT cost sharing exemption and put in-year repayments of tax to charities on a statutory footing. All good - but nothing new.
So while the chancellor offered no apology for the budget being for business I do think that it's a shame charities and social investment were out of sight. Let's just hope it is not a case of out of sight - out of mind.
Caron Bradshaw is chief executive of the Charity Finance Group
03 Apr 2012 | Torrie Callander, Global Reach Partners
ONCE AGAIN, there are rumblings of change in European politics. The repercussions of which could directly impact the single currency, and importers and exporters in the UK.
As I boarded the Underground the other week I saw a billboard for a well know current affairs magazine that bore the slogan "Every German owns a second property - it's called Greece". This billboard sparked fury from respected members of the Greek population in London, but the reasoning behind the jibe could cause a much bigger political and financial rift.
It is well documented that Greece has been bailed out by a European Financial Stability Facility (EFSF) that was heavily contributed to by Germany. Unsurprisingly, public sentiment in Germany smacks of frustration with the level of bailout required. This sentiment is now manifesting itself in the form of pressure on German chancellor Angela Merkel to limit the amount of funds offered by Germany to bail out its counterparts.
If Merkel follows the German crowd then the European debt crisis is likely to rear its head again. So how could this affect the Euro exchange rates?
The majority of European (and world) financial leaders are calling for a major security blanket to be created that will protect Europe from any future crises. The EFSF was developed in 2010 as a temporary measure and expires next year. Ministers are now looking to build a permanent "firewall", called the European Stability Mechanism (ESM), worth €1tn. Angela Merkel has been publically sceptical about the mechanism and particularly about the size of firewall being discussed. Perhaps this is due to a domestic resistance and reluctance to risk any more of German taxpayers' money.
Financial markets like stability. The bigger and more solid the bailout fund the more positively the markets will react. As a result, European share prices, government bonds and - most importantly - the Euro itself would likely become more stable. This has been proven by the positive quarter that European markets have enjoyed this year as a result of stability being achieved in Greece. Welcome news to British exporters who felt a very real threat of a Euro collapse in late 2011, which would have been extremely damaging to export prices.
As it appeared that the German chancellor was reluctant to commit to the ESM, markets started to creak once more. Spanish bond yields are now under pressure and European stock markets have seen their advances tempered over the last two weeks - all of which has pushed the Euro slightly weaker again.
Though there are rumours abound that Merkel might be showing signs of changing her mind, she has stated publicly that the ESM is an essential step forward - even if only at €500bn strong. Although this has provided solace to the financial markets, there is potential fall out ahead over the size of the mechanism itself.
If strong action is not taken to safeguard European nations and investors against future financial crisis, the Euro is likely to weaken heavily. However, if Merkel's apparent U-turn continues and the ESM is agreed, the Euro could regain ground. This has led many Finance directors to adopt a protective currency hedging strategy that also offers them the chance to take advantage of any favourable movements. Given the uncertainty that continues to run the markets - this is a wise move.
Torrie Callander is a corporate dealer at business foreign exchange specialists, Global Reach Partners
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