Futureproof your business: How to diversify your business funds

In an unpredictable economic climate, it’s essential to be as risk-averse as possible when it comes to your finances. But, along with protecting your funds, you can also optimise your finances by diversifying them.

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Protect your funds with diversification

Diversifying your funds across several banks is one way to spread your risk, for example, in case of fraud, having your data compromised or losing funds due to events like a bank failing.

Diversification is a good way to protect your funds and assets from loss. While national protections and insurance are in place, these often have limits. For example, the UK Financial Services Compensation Scheme protects £85,000 of clients’ deposits or £170,000 for joint accounts. Anything above this is at the discretion of the government.

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Maximise returns and lower risk by splitting funds

Even though a bank may have been around for decades, it doesn’t make it immune to failure. Instead of relying on one bank or financial institution to provide you with everything your business needs, you can maximise returns and lower risk by spreading your money. There are many benefits of doing so, for example:

● Spread your risk: A good way to protect your business’ cash reserves is to spread them across several banks and financial platforms. That way, if one fails, it only impacts a part of your funds and ultimately means that you lower your overall risk.

● Competitive deals: Using different banks gives you access to different interest rates or services, and you can get competitive deals by splitting your funds.

● Prevent fraud: Keeping all your funds in one place can open up a greater risk of theft or fraud. With multiple third parties reviewing your company’s fund with fraud detection in place, it may be easier to spot unusual patterns before it turns into a big problem.

● Use a fintech company:

○ Some fintech companies, like Juni, have an Electronic Money Licence which allows them to issue e-money. This means they need to follow regulations to separate your money from theirs. So, your funds will always be held securely in segregated accounts with the company’s partner bank.

○ Financial platforms like Juni are not banks, meaning, they do not lend your funds to people or businesses which can also lower your exposure.

Diversification can be time-consuming to start with, but with the developments in tech and fintech, it can be easier than ever. So get strategic, and you can maximise your returns by putting your money where it can earn for you. For example, one institution may have a competitive interest rate, while another may have perks like cashback on certain types of spend.

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Reduce concentration risk

For our customers, Juni can be one part of a strategy to diversify their funds to reduce concentration risk. Several of our customers choose to split their funds between different types of banks and financial platforms, including Juni. We can make it easy to manage your finances in one place. By integrating your banks with Juni, you can see individual and total balances of all your integrated accounts, no matter how many you’re working with.

Splitting their funds like this helps them to maximise their finances. This way, they can benefit from lowering their concentration risk, while getting perks like low FX fees, cashback, multi-currency accounts and cards, and flexible credit lines on their short-term funds to maximise the day-to-day operations.

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Shift your strategy

Diversifying your funds is a valuable part of your financial strategy. Although it’s tempting to focus solely on your expenses to weather the storm, and managing multiple accounts can be more work, it can be worth it. Consider putting a diversification strategy in place to spread the risk of the funds you already have – and reap the potential benefits.