More than a third hurt by weakened currency but few have proactive
strategy to manage
TORONTO, Nov. 5, 2015 /CNW/ - Although the recent decline in the
Canadian dollar may be a boon for some industries, a new poll by CIBC (TSX: CM) (NYSE: CM) finds that more than one-third (37 per cent) of Canadian small business owners say their business is worse off as a
result of the falling loonie.
Highlights of the poll include:
37 per cent of business owners polled say the recent decline in the Canadian dollar
against the U.S. dollar has had a negative impact on their business
Only 19 per cent say they have benefited from the lower dollar
44 per cent say the fall in the dollar has had little to no impact
A prior CIBC poll revealed that 65 per cent of small business owners haven't taken any steps to protect their
business from currency fluctuations
"Some small business owners are clearly feeling the effects of a
fluctuating exchange rate on their bottom line," says Shelley Swanlund,
Vice President, CIBC Business Banking and Head of Small Business.
"While less than one in five have benefitted, many more are feeling the
pinch. Some proactive planning now, however, can help mitigate the
The loonie has seen a steep decline against the greenback over the last
three years, slipping nearly 30 per cent from a high of US$1.04 in
September 2012 to a recent low of about 74 cents U.S. in September this
year. Despite this significant swing, an earlier CIBC poll found that 65 per cent of small business owners had not taken steps to protect their business
from currency fluctuations.
Adapting to a weaker dollar
"While the majority of owners say the drop in the value of the loonie is
having an impact on their finances, we know only a third have taken
action to address the business effect of a fluctuating dollar," says
Ms. Swanlund. "For businesses that need to purchase raw materials or
supplies abroad or those importing goods for sale, even small swings in
currency can make it harder to compete and affect their bottom line
which highlights the need to have a currency strategy."
Ms. Swanlund suggests that companies who buy products or services south
of the border should open up a U.S. dollar bank account. This can be
used to pay bills, and to have the opportunity to convert funds when
the loonie climbs, such as in the last few weeks that saw a five per
cent jump in value for the Canadian dollar.
Small business owners need to think beyond our borders
A recent report from CIBC Economics points out the importance of the small business
sector to the Canadian economy noting it created 80 per cent of all new
private-sector jobs in the last year. The report also highlighted that
this was largely driven by the housing market and Canadian consumer
Given the slowing domestic market, a weaker loonie and upswing of
economic activity stateside, Benjamin Tal, Deputy Chief Economist and
one of the authors of the CIBC report, says it is important for
Canadian small and medium-sized businesses to become more export
Ms. Swanlund agrees that now is the time for many small businesses to
build or expand their export focus. "Not all business owners can
continue to rely on the consumer to deliver growth, and a weaker loonie
is opening up new opportunities beyond our borders," said Ms. Swanlund.
"While it needs to be carefully planned out, many businesses can
benefit from a weaker dollar to look abroad for new customers, but it
is important to first sit down with advisors who understand the
financial, operational and logistic challenges of exporting."
Tips for managing currency fluctuations:
Have a currency plan. Include a currency fluctuation strategy in your business plan. For
example, CIBC small business advisors work with owners to explore
options such as holding U.S. dollar accounts, using FX hedging
strategies and having access to capital to address fluctuations in cash
Build flexibility into your business model. Currency fluctuations and other unexpected expenses can catch small
business owners off guard. Be sure your business can withstand
temporary fluctuations in cash flow by having access to an emergency
reserve fund, whether it is accumulated savings or a line of credit.
CIBC's foreign exchange specialists as well as FX Online @ CIBC offer tools and advice to carry out trades in foreign exchange swiftly
(e.g., monitor real-time foreign exchange rates, access all trade
details in one location, receive an audit trail on your transactions)
Leverage other free online tools such as the CIBC Your Guide to Business Planning, found in the CIBC Small Business Advice Centre.
KEY POLL FINDINGS:
How business owners say the decline of the Canadian dollar against the
U.S. dollar is having an impact on business?
• Very positive (7%)
• Somewhat positive (12%)
• Very negative (11%)
• Somewhat negative (26%)
Little to no impact
Canadian business owners' preference on what CAD/USD situation is better
Parity between CAD and USD
CAD weaker than USD
CAD stronger than USD
CAD/USD exchange rate does not affect my business
From September 23 to September 25, 2015, an online survey was conducted
among 751 randomly selected Angus Reid Forum panelists who are small
business owners. The margin of error - which measures sampling
variability - is +/- 3.58 per cent, 19 times out of 20. Discrepancies
in or between totals are due to rounding.
CIBC Small Business Services
For nearly 150 years, CIBC has been providing small business owners with
the advice, services, and support they need to thrive and grow. CIBC
recognizes that the business and personal finances of small business
owners are often intertwined, which can present both opportunities and
challenges. We believe that the best advice comes from someone who
understands your needs as a business owner and as an individual.
CIBC provides small business owners with the services of a dedicated
CIBC Small Business Advisor, who acts as a single point of contact for
all small business owner needs. This experienced professional is
committed to understanding the business and the industry in which small
business owners operate, as well as their personal financial goals.
CIBC business advisors work with small business owners to find
integrated solutions to help them achieve their vision for their
business and their life.
CIBC is a leading Canadian-based global financial institution with 11
million personal banking and business clients. Through our three major
business units - Retail and Business Banking, Wealth Management and
Capital Markets - CIBC offers a full range of products and services
through its comprehensive electronic banking network, banking centres
and offices across Canada with offices in the United States and around
the world. You can find other news releases and information about CIBC
in our Media Centre on our corporate website at www.cibc.com.
PDF available at: http://stream1.newswire.ca/media/2015/11/05/20151105_C9183_DOC_EN_44399.pdf
For further information:
Olga Petrycki, Director, External Communications, 416-306-9760 or email@example.com