By Vivek Savani, UK Country Manager, iBanFirst
How do you prepare for a swing in a major currency and its impact on your profit margin? That’s the question that global small and medium-sized enterprises have been forced to face this year, as economic volatility – driven by tariff confusion, geopolitical conflict and market nerves – has caused currencies to become unpredictable.
Earlier this year, traditional safe-havens like the Yen and Swiss franc jumped notably following the announcement of sweeping US tariffs, and so businesses have had to grapple with the result of this volatility on their supply chains, investments and growth. Now, as the year-end fast approaches, there is likely to be no reprieve, as a usually turbulent winter period will place great importance on navigating FX risk and exposure.
Navigating year-end currency volatility
The end of the year is a busy time for many small businesses; the pressure is on to meet targets, while budgets are being set for the year ahead. But there’s not just internal financial pressures to contend with, businesses face the added challenge of anticipating and reacting to market trends.
For instance, while seasonal foreign exchange (FX) swings are largely a myth, currency market volatility does typically increase towards the end of the year. In December, particularly in the run-up to Christmas, markets become busier and more unpredictable due to lower liquidity and end-of-year institutional targets.
If the past year has taught businesses anything, it is that they must be acutely aware of rapid changes in the FX market. Tariff-driven volatility has been a reminder that currency shifts can happen overnight. We saw its impact on onthe euro and pound when Trump’s administration announced better tariffs for the UK, but not the EU, for instance.
The last quarter of the year should always be a reminder to prepare for the unexpected. The best way to mitigate FX risk is to find solutions that enable rate lock-ins, flexibility and are engineered to protect profit margins. Should businesses be seeking additional controls and protection, locking in buy-sell rates now for future transactions could mean they stand to benefit once the holiday season is over.
Local holidays and country-specific requirements
Alongside FX market volatility, businesses must also prepare to navigate the practical realities of moving money across borders at the end of the year. This is because year-end financial flows are complicated by local holidays, changing time zones as well as the maturity of regional banking systems.
To explain this further, even if a business operates on international hours, local banking times and practices can still impact how quickly payments can be processed. Businesses may find that their desired payment corridors are convoluted or that payments become delayed due to seasonal holidays.
For example, throughout the week-long celebrations for Chinese New Year, local suppliers and partners are unavailable and banking hours change. While, in the UK, banks and wider markets are typically shut over the Christmas period. Businesses must stay aware of cultural nuance and take steps to protect their margins – like preparing payments in advance or increasing stock levels early to reduce delays.
What’s more, inconsistent global processing times can disrupt otherwise timely international payments. For example, our research found that only 12% of USD payments to China and Hong Kong, key manufacturing hubs, are completed in under two hours. So, if businesses are underprepared or without proper third-party support, it’s easy to miss cut-off points and deadlines for suppliers – which could then impact stock levels, relationships and ultimately revenue.
By proactively managing these risks, SMEs can safeguard their cash flow, protect profitability and maintain confidence in their international operations, even during periods of heightened market uncertainty. For instance, locking in exchange rates can help avoid surprises, while a dynamic approach offers greater flexibility. Seeking expert advice combined with solutions which offer flexibility at swift notice is essential to navigating otherwise complex FX.
A better financial footing in 2026
FX volatility and economic challenges aren’t going away. For small businesses, the stakes are high over the holiday season and those that thrive will have the right tools and strategies in place to offset uncertainty. Proactively locking in rates, anticipating local holidays and adopting risk management practices are all practical steps that can help protect profit margins.
By taking steps now to improve international payments, businesses can maintain a healthy balance sheet, maintain supplier and customer confidence, and turn uncertainty into an opportunity for growth in the year ahead.