Risk Management | Case Studies
How Mechatherm used risk management strategies to bolster its export business
Mechatherm is a leading provider of bespoke casthouse equipment to the Aluminium industry. Established in 1973, they started trading internationally in the 1980s and now export to over 40 countries worldwide, having won the Queen’s Award for Export three times. They represent a real success story and are well placed to shed light on the challenges exporters face, and the help that is available to help them succeed.
Multi-million pound projects with lengthy timescales and multiple currencies
Tailor-made Forex risk management solutions for even the most complex projects
Boosted exporting capability to represent 95% of turnover
The logistical challenges are significant when dealing with overseas territories. In a post-Covid world, even getting a face-to-face meeting is more problematic than it used to be, with different quarantine requirements in different countries. It can also be difficult to obtain the right work visas, or knowing who to speak to at an embassy, when your starting point is a Google search. Many companies simply don’t have the resources or expertise to deal with the administrative burden, and it takes up valuable time which could be spent focused on the business.
There are also financial challenges to overcome. In Mechatherm’s case, when dealing with multi-million pound contracts and client companies which are giant multinationals, the scale of the numbers involved was alarming. Their bank wanted them to deposit funds in a security account, and with no large parent company in the wings to provide support, there were huge implications for cashflow.
There is also the question of currency risk. Mechatherm could be sourcing materials from five or six countries for a project in a different territory altogether. Funds might be coming in at payment milestones over a one-to-two-year period. Any move in exchange rates could be potentially fatal for a business, when working with such huge numbers.
The Solution: Help is just a phone call away
Mechatherm received the advice and guidance they needed on exporting from the Department for International Trade (DIT). With a named contact who was extremely responsive, they found it was easy to find out who to call in an embassy or what the fast-track route was to get work visas granted. DIT also helped with applying for funding to partly fund overseas business trips, and the Bank Guarantee Support Scheme helped to free up cashflow and allow Mechatherm to forge more aggressive deals with clients.
Mechatherm found support with currency risk through Western Union Business Solutions. WUBS provided support with strategies tailor-made for the large-scale, long-term, multi-currency projects that characterised Mechatherm’s business. Freed from the limits imposed by the bank, they were able to hedge much larger amounts, and with no need to deposit funds in a security account, cashflow was much more fluid.
The Results: An exporting success story
Mechatherm now boasts a turnover that is over 95% driven by exports. There is no question that without exports, the company would have struggled to survive, as the UK market for their products is so limited. Their success in exporting has been helped by the practical one-on-one advice and support from DIT and the specialist expertise of Western Union Business Solutions.
‘I’d encourage every UK company to export. I would tell them not to be scared as there is so much help available. Just picking up the phone to DIT can make such a difference, and most people don’t realise how the department can support businesses with their in-depth exporting needs.’
‘I would also recommend using a specialist dealing house such as Western Union Business Solutions. When I think back, our business growth was very restricted by our bank’s policies on currency transactions, and I also can’t believe how much time I used to spend online watching currency movements to safeguard our profit margins. Having a currency specialist partner has made life so much easier.’
- Alan Burrows, Managing Director of Mechatherm.
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