FX Risk: It’s Not Just About the Exchange Rates

18-06-2020 | treasuryXL | XE |

Let’s face it: for individuals and businesses alike, exchange rates are one of the most important factors of international money transfer. Having a favorable exchange rate can make a significant difference in how much money you need to provide in your payments, and knowing that you’ll always get a good rate can make a difference in your day-to-day transactions as well as your long-term strategic planning.

However, in the world of FX and FX risk management, one common mistake we see is businesses solely looking at the rates they can get from their FX providers, and failing to look past the rate to other determining factors. But what are these factors, and what should businesses really be looking for in their FX providers?

Why shouldn’t you only look at the rates?

To clarify: we aren’t saying that you shouldn’t look at the rates offered by potential providers. They just aren’t the only thing that will affect your business’s exposure to currency risk.

FX providers don’t just help you make currency exchanges. They offer a wide range of other products and services to help organizations manage their international payments as well as manage their FX risk, and having a narrow focus on the exchange rates can prevent you from seeing the bigger picture and understanding how the FX provider can help your business as a whole.

Think about all of the ways in which your business engages with international currencies, and look at all of your potential FX risk exposures. They don’t all have to do with the exchange rates, right? The right provider for your organization will have product offerings that address your organization’s specific needs.

It’s also important to assess potential providers with a discerning eye, and with the mantra, “If something seems too good to be true, it probably is.” If a provider offers fantastic rates that noticeably stand out from the rates offered by the competition, carefully consider why that might be. Are they able to offer these fantastic rates at the cost of offering other essential products and services to their clients? Don’t be afraid to ask the detailed questions.

Rate comparisons can also be misleading. The foreign exchange markets are constantly moving, and it’s not uncommon for the rates to change multiple times per day. Unless you’re comparing rates at one precise moment, it’s possible that you don’t have a completely accurate comparison between the two. A rate that looks stronger now might not be that way in a few hours.

As a final note, keep in mind that one service that many foreign exchange providers offer is watching the rates for you. If there is a particular rate that your business wants for its transactions, look into providers with a “rate alert” option so you won’t spend all of your time being preoccupied by checking for the best rate.

What else should you look for?

So now that we’ve established that rates aren’t the only offering you should look for, you’re probably wondering what else you should be looking for. Ultimately, that depends on your foreign exchange risk and what your business is looking for.

Once you’ve created your FX risk management policy, consider what your organization can’t do alone. That’s where your foreign exchange provider can help you. Some of the features you might want to look for include:

  • Specialized services for your sector or business operations
  • Support services to aid when something goes wrong
  • Comprehensive online services that can be accessed anywhere, any time of day
  • Transparency and clear communication
  • Services that can simplify complex business processes
  • Fast transaction speeds

Don’t be afraid to shop around for the right foreign exchange provider. If you want the best solutions for your business, it might take some time before you find the provider that has the expertise and products to address your risks.

Source

 

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

 

 

 

An Introduction to Forwards, Futures and Options | Part 2

17-06-2020 | by Aastha Tomar

In her previous post, our Expert Aastha Tomar explained how the forwards work. Lets see the second type of hedge. The second type of hedge contract is futures. Like forwards they also fix the currency rate for a future date. The major difference between a future and a forward is that futures are exchange traded and therefore they are standardized.

Features of Futures

  1. They have standard sizes, delivery dates and settlement rules. The settlement mechanisms reduces much of the credit risk .
    -> Now why do I say that credit risk is reduced ?                                                                                                                                                                                                                                                                                                                                                                                                                    As mentioned earlier, all settlement takes place through the exchange clearing house and the two parties buyer and seller are not in direct contact with each other. Therefore since it is the responsibility of exchange clearing house to settle the trade, the counter-parties run the credit risk of the exchange clearing house instead on each other.

  2. They can be cash settled or physically delivered and are legally binding.They trade in one contract size, so corporate must trade in multiples of that
  3. They move in increments called ticks and each tick has a value. The number of ticks made or lost on a trade determines the loss/profit of the trade
  4. The counter parties holding the contracts on the expiration date must deliver the currency amount at the specified price on the specified delivery date or they can even close out the position before the expiry date, this can be done by doing an equal and opposite trade in the same futures contract.
  5. To enter into a future contract an initial deposit into a margin account is required . The contract is then marked to market each day and a company is required to add more funds to the margin account if cumulative losses drain the margin account. If the company does not respond to a margin call, the exchange closes out the contract.
  6. The contracts are physically delivered four times in a year on the third Wednesday of March, June, September, and December.

Difference between future and forwards

  1. Futures are traded on an exchange hence standardized therefore a company may not be able to hedge the exact and full amount of underlying transaction. They may have to under-hedge .
  2. The delivery date in future may not be same as the maturity of underlying transaction which may open the corporate for some market fluctuation.
  3. The treasures can easily unwind a hedge position earlier than its normal settlement date if needed.
  4. In a forward contract, the bank includes a transaction fee in the contract. In a futures contract, a broker charges a commission to execute the deal.
Lets understand futures with an example :

Lets take EUR/USD as an example,

One contract size for EURUSD future is $125,000 worth of Euros and one tick size for EURUSD future is .00005. Therefore the price movement will be ($125,000*.00005) =$6.25 per EUR

Now if we purchase one futures contract of the EUR/USD, which is trading $1.0901 . We are hoping that EUR will appreciate , relative to the Dollar. Suppose we are lucky and things go as expected, and the exchange rate rises to $1.09015, We will make $6.25 in profit (per contract). Cool !!! Suppose we are luckier and FED makes some negative announcement on top of that ECB does some tremendous positive changes in their policy due to which EUR shoots up becomes much more stronger and exchange rate rises to $1.09110 (a whooping increase of 20 ticks), then we would make $125.00 in profit per contract ($6.25 x 20 ticks = $125.00).

lets see it more clearly in the following table :

Now why do corporates stay away from Futures ?

  1. Futures cannot be customized hence there is not always a complete hedge
  2. Companies don’t want to put initial margin money in the exchange
  3. They want to stay away from the hassle of mark to market each day and depositing money if the losses erase the deposited margin money
  4. With forwards there is a human interaction with the banker who enters trade with you and you feel more comfortable with that, you may also negotiate forward premia with the banker and if there is a long standing relationship with the bank, the bank sometimes forego or reduce the fees. In Futures that’s not the case.

Whether its a forward or future contract, nothing is difficult if you have the intent to learn the product . Once you start understanding how hedge market works and start realizing the benefit of it then it will eventually be beneficial for you as a Treasurer and for your corporate which will be saved from unwanted currency fluctuations. In our third and last post in this series we will talk about Options ..keep learning, be safe.. to be continued ….

 

Aastha Tomar

FX & Derivatives | Debt Capital Markets | MBA Finance
Electrical Engineer | Sustainability

Do You Know Your Business’s Foreign Exchange Risks?

11-06-2020 | treasuryXL | XE |

Every business that deals with international currency has foreign exchange risk, but every organization will face a different set of issues and risk factors, depending on their operations.

The first step to building a strong FX risk management program and reducing your organization’s foreign exchange risk is knowing:

  • What your exposures are,
  • Where they come from, and
  • How they can impact your business.

Many businesses around the world drastically underestimate their foreign exchange risk level, and are unaware of many of their greatest exposures. In this next installment of our series on FX risk management for businesses, we want to take you through the steps of assessing and determining your business’s foreign exchange risks. From there, you’ll be primed to take the next step of formulating your risk management strategy.

Where does foreign exchange risk come from?

There are many ways currency market exposure and foreign exchange risk can present themselves to your organization.

Some of the most common causes of foreign exchange risk include:

  • Importing. Does your business import any products or materials from overseas? If fluctuations in the market cause the value of your country’s currency to drop, then your organization’s importing costs could see a drastic increase.
  • Exporting. On the other hand, if your business sells goods and services to other countries, think about what market volatility could do for your prices. If your country’s currency increases in value, your business might not be as competitive in your market.
  • Balance sheet risk. If your organization has any subsidiaries or entities overseas that take care of some day-to-day operations, the value of their operations could change when the currency exchange rates do.

These are just a few examples of common causes of foreign exchange risk. Your business’s specific foreign exchange risk exposures will depend on what you do in your day-to-day operations and how you handle international currencies.

How do you know if your business has foreign exchange risk?

Identifying potential sources of risk is the first step. Once you’ve examined how your business deals with international currencies and whether your operations have any risk factors, you’ll need to assess the size of the risk and its potential impact.

There are three areas you’ll want to focus on:

  • Potential volatility. The markets are constantly moving, but global exchange rates can only move so far. Consider what could realistically happen and how that would affect your business, in order to get a better idea of your true exposure.
  • Net impact. Volatility could have a negative effect on your business, but your business could also see an increase in revenue from certain market fluctuations. Don’t just consider one element of the risk: look at the bigger picture.
  • Time. How far ahead have you planned? And on the other hand, how far ahead can you realistically plan while still making accurate, useful assessments?

How can you combat foreign exchange risk?

If some of these questions are making you feel overwhelmed, don’t worry. You’re not the only one who feels this way. Many businesses of all sizes around the world have found that they don’t have the expertise, time, or resources to fully assess their currency risk exposure and create a comprehensive risk management strategy that can fully address their risk profile.

A foreign exchange specialist can give your organization the expert guidance that it needs to create a plan to combat your foreign exchange risk and minimize the impact of market motion. At Xe, we’ve spent more than 25 years in the global currency markets. We understand foreign exchange risk, and we want to help you and your business do the same.

Over 13,000 businesses each year lean on us for expert guidance and support in assessing and combating foreign exchange risk. Are you ready to manage your risk Visit our Business page for more information about our offerings and to take the first steps in enhancing your organization’s foreign exchange risk management.

 

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

 

 

 

 

Source

What does experience in Treasury get you?

10-06-2020 | Niki van Zanten

In the wonderful world of Treasury there is an easy and digestible answer for most things, but to cover the full context requires general elaboration. In other words, there are always main points but fine-tuning is equally important and the devil is in the details.

Keeping this in mind, let’s get right into attempting to answer the headline question of this blog and unravel what experience can mean for you in financial risk management with the following points

  • The answer before the analysis
  • The right analysis and additional validation
  • Speed when needed and a reserved approach 
  • An actual opinion
  • Leadership in crisis
  • Holistic approach to Finance and ability to see what’s really going on

The answer before the analysis

At school you have the smart kids who have the answer for tough questions (lets say for conversation sake a math equation which looks like this 3(1-2x)=-9, where question is what x is*) and get there by taking the necessary steps** to come to the correct answer. This is what you are taught and it leads to the desired result. Then, there is a second group who shout out the right answer immediately but skipped all the steps involved. The teacher will disapprove of this behavior as it’s not how you are taught to handle a mathematical problem. Also not all kids can be taught to handle problems this way. If experience were to be molded into these group of kids, it would perhaps be one who can answer the question immediately and then explain this steps in retrospect. In financial markets this combination is very valuable as going for the process can be cumbersome and hard to explain, unless you see what will happen at the beginning.

The right analysis and the right questions

Imagine you walk into a wine shop and ask for a bottle of wine to combine with a mouth watering turbot with lobster Bearnaise sauce. The wine shop owner recommends a Montrachet**, asking no further question. You ask him, why this wine? He answers the following; because it is a thick buttery wine thus perfectly combining with the richness of Bearnaise. Also this happens to be an excellent year from an equally exceptional producer. You end up buying the bottle to return home and taste a thirteen in a dozen overpriced bottle of wine which does reasonable well with the food but has no element of surprise or the fascination one might expect.

A few question from the wine shop owner like, what kind of wine do you appreciate a lot and what do you like about it or how much is your budget would help you on the way. The best question from your side is potential, did you ever try it? If it turns out he didn’t try it and is still trying to sell it to you he has a close resemblance to a very typical sales person in the financial sector. In other words, experience enables people to ask the right question as well as create a value and advice instead of value add for the selling party only.

Speed when needed or a reserved approach

Typically, it is assumed that decision making in financial markets and Risk management requires speed. In most cases, this is correct, providing you understand of the exposure for which your are hedging as well as the derivative you are using. Put in a simple example, when hedging a 5 year INR loan, experience will tell you to do some extra due diligence on the accuracy of the underlying exposure for the simple reason that the consequences can be significant if things go wrong. Immediately, you will also realize a 5 year tenor on INR is either not liquid or the credit component is priced in at a hefty charge replacing your FX risk with an interest risk on the roll over. If you do not execute with speed, you could be exposed to the spot risk; if you execute to fast, you might hedge something not required or with a derivative which doesn’t do the job as intended. A seasoned advisor will be the best of both worlds.

An actual opinion

Experience creates a backbone as well as a level of comfort to believe what you are saying. Consequently, this boils down to the question; Why is someone trying to sell something to me? Because you need it or because they need you to make their PL? This goes into the discussion on whether an advisor has an intrinsic or extrinsic motivation. In my view, experience is not a guarantee on where motivation comes from, but it had a lot more time to positively develop. You will hear what you are better of hearing than what you want to hear. On top of that, the advise will be more holistic as it takes a while to get all the bits and pieces of treasury together, let alone how it fits across departments in a company.

Leadership in crisis 

Argentina 2018. Hefty devaluation on the currency as well as very steep and volatile interest rates combined with liquidity issues, not to forget the social and economic disaster hitting many citizens. Situations like this, attract senior management attention like Winnie the Pooh spotting a jar of honey. One might be inclined to leave the ”when to hedge or not” decision to senior management or have endless meetings discussing business mitigation. Each crisis has different triggers as well as solutions. A seasoned crisis manager does add direct value in not only identifying root cause of what’s going on, whether financial instruments actually provide relief or are a black hole of money and in putting together the right and moreover realistic guidance for the business. I am aware of the fact that people do not like hearing bad news, but not listening to it usually brings problems back on steroids. 

Holistic approach

This is a tough one. Most people will agree, the big picture is the best one to follow, but its very common across corporates to religiously hedge PL exposures. Even in cases where there are conflicts, like the cash flow at company level being different sign than the PL FX exposure, often a bogus hedge is implemented. A holistic approach and good target setting, helps you pick the strategy with the overall best results and experience.

Conclusion

These are just a few considerations on why experience can provide added value in (FX) risk management beyond the well know assumption that it provides a way to do more in less time and is a great way to also transfer knowledge down to the younger workforce.

Hope this gives some food for thought and many fruitful discussions.

 

* multiply by 3 giving 3-6X=—9 and then deducting 3 on each side reducing equation to -6X=-12 revealing the answer.

** Montrachet is one of the words most sought after white wines. Also happy to discuss wine but that’s a different beast and business proposition.

 

Niki van Zanten

FX specialist

 

How to Build a FX Risk Management Policy for Your Business

04-06-2020 | treasuryXL | XE |

If you’ve been keeping up with our blog over the past few weeks, then you should be all caught up on foreign exchange risk. You know that your organization likely has some degree of FX risk, that you should make it a priority to assess your risk level and exposures, and that foregoing FX risk management is one of the most costly mistakes your business could make.

This brings us to our next point: crafting a foreign exchange risk management policy. Having a policy in place is one of the most important steps your organization can take to address foreign exchange risk and volatility in the global currency markets. But if you don’t have a policy in place, or you don’t think your current policy addresses the full scope of your organization’s FX risk, it’s time for an upgrade.

Not sure what to do or where to start? Let us take you through the steps of developing your organization’s foreign exchange risk management policy.

Why do you need a foreign exchange risk management policy?

Here’s the simple answer. If your organization doesn’t have a policy in place to deal with foreign exchange risk, you’ll only be able to respond to situations after they’ve already happened. Instead of acting to reduce your FX risk exposure, you’ll only be able to react to damage that’s already been done.

The markets are constantly moving, and volatility can have a real impact on your business’s bottom line without any warning. Without an FX risk management plan, you’ll only be able to jump into action once the damage has been done, and some of your initial response time will likely be taken up by strategizing over how to properly respond. In that time, the impacts to your business could easily increase.

A comprehensive FX risk management plan will not only give your organization a plan to jump into action in the event that market volatility has an impact on your business, but will also include long-term, ongoing measures to manage currency risk in your business’s day-to-day operations, even in times of muted volatility. By taking steps to reduce your risk exposures now, you can minimize the effects of volatility in the future.

What should your policy cover?

There’s no singular answer to this question, because there’s no such thing as a one-size-fits-all foreign exchange risk management policy. Every policy is different, because an effective policy will address your organization’s FX risks, based on your day-to-day operations and exposures.

There are, however, a few basic elements that every policy should make a point to include.

  • How much foreign exchange risk your business can handle, and over what time periods.
  • The tools your company will use to mitigate said risks.
  • Who in the business is authorized to make decisions about FX risk.
  • A robust process to manage currency risk on an ongoing basis (rather than ad hoc reactions).
  • Long-term strategic planning decisions (as opposed to just day-by-day developments).
  • Measures and action items that can be shared with a group of people, so FX risk management does not fall solely on one key person.

Once the policy has been created, it’s also important that you have a process in place to share it with the company at large, in order for the company to be able to apply risk reduction measures at all times (even if a key decision-maker is out sick or leaves the company).

How often should you update your policy?

At the very least, you should revisit your FX risk management plans once a year. But it might not be a bad idea to reassess more frequently, particularly if your business undergoes changes that could impact its foreign exchange risk.

The following changes would be good opportunities to readjust your FX risk management strategy:

  • An increase or decrease in exposure to particular overseas markets
  • Exposure to new overseas markets or currencies
  • Changes in the outlook for relevant currency markets.

How to get started

If you aren’t sure how to create or develop a risk management policy, we encourage you to discuss this with a foreign exchange specialist. A knowledgeable specialist can assess your FX risk, discuss your options, and help you to formulate the risk management policy that your organization needs for its specific risk profile.

For over 25 years, Xe has been a knowledgeable authority in the global currency markets. They understand foreign exchange risk, they help over 13,000 businesses each year with their foreign exchange and risk management needs.

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

 

 

 

 

Source

An Introduction to Forwards, Futures and Options | Part 1

03-06-2020 | by Aastha Tomar

Our financial world has now gone through enough crisis. Some learnt from previous crisis and were braced for the next while some were still in their learning phase. The current crisis took everyone by alteration because this time it was not the financial sector which was responsible for the ordain. The fluctuations seen in equity, bond, commodity and currency markets may have become Achilles heels for Corporate Treasurers in current times.

The incumbent state of affairs was such that Corporates had to protect their bottom line while trying to stay afloat. The entire cash flow projections would have gone for a flip for those who didn’t hedge their foreign currency exposure. One way that would have taken a part of vexation away from corporate treasurers due to currency fluctuation is hedging. It would have attenuated the impact of currency fluctuation on investments, borrowings, assets etc .

Let us have a look at the most used and basic methods of hedging in this article :

Forwards

So what are forwards? In a simple language its a hedge product between two parties which freezes your cash flow for a future date. That ways whatever the market situation be on the maturity date of the hedge, your cash flows are locked and predetermined. Whether you are an exporter who can know the exact value of future payments or an importer who can anticipate the exact costs of products; a forward will hedge the risk of currency fluctuation for both.

Features of Forwards :

  1. Specifies the amount, date and rate for a future currency exchange
  2. Parties involved are banks and businesses with foreign currency exposure
  3. They are over the counter products
  4. They can be customized
  5. They need two parties, one buyer other a seller
  6. There is no upfront payment
  7. Determining a currency forward rate depends on interest rate differentials for the currency pair in question

Example :

Suppose you are an exporter based in the Netherlands and you want to sell Dollars in an years time. You know due to current euro zone, corona crisis and negative interest rate scenarios Euro may fluctuate sideways and therefore you want to lock in the price of USD today itself so that one year down the line you don’t have to worry about the fluctuating rates. What do you do ? You approach a bank informing them that you have to sell USD (buy EURUSD) for 1st June, 2021. After basic documentation bank enters with an forward agreement with you . Where in today’s spot rate , the currency premium for one year , the amount of hedge and the maturity rate will be mentioned .

 

Spot EURUSD : 1.08282 (1 EUR = 1.08282 USD )

1 year interest rate for EUR = -.07%

1 year interest rate for USD = 0.7%

 

So after one year based on interest rate parity :

 

EUR 1* ( 1+(-.0007))= USD 1.08282 *( 1+ .007)

0.9993 EUR = 1.090 USD

Therefore 1 EUR = 1.0911 USD

 

Therefore by entering a forward contract today you have fixed your EURUSD rate to 1.0911. Note that because the dollar has a higher interest rate than the EUR, it trades at a forward discount to the EUR.

 

Let us take a simple scenario analysis to make things clearer :

 

Here the forward deal amount is : EUR 1mn

Spot rate on the day of deal is : 1.08282

Forward rate fixed for the deal is : 1.0911

We can clearly see above that if the spot is same as the forward rate on the maturity date then there is no loss or gain, but if spot moves to 1.09250 then the corporate saves USD 1400 on the contrary if spot moves to 1.0900 the corporate wont be able to take advantage of the low price and will have to exercise the forward at 1.0911 as fixed earlier thus letting go of USD 1100.

So if forwards are so beneficial why do corporates still do not execute forwards for all of their foreign currency transactions :

  1. There is some documentation involved and corporates sometimes feel that its time taking and taxing
  2. At maturity date what so ever the actual spot rate be your forward will be executed at the fixed price , and some corporates feel that they may lose a chance to take advantage of better rates.
  3. Banks charge a small fee for entering the transactions which corporates want to save.
  4. Corporates feel the currency wont fluctuate much and hence don’t want to get into forward transaction.

Whatever the reasons be but the main business of corporates is not to use their energies in managing their fx risk but to increase profits by their mainline business hence its always advised for corporates to hedge their fx risk as much as possible to increase efficiency and prevent themselves from unseen shocks.

In our next post in this series we will see a second type of hedge … to be continued. Till then keep learning and be safe .

 

Aastha Tomar

FX & Derivatives | Debt Capital Markets | MBA Finance
Electrical Engineer | Sustainability

Why FX Risk Management is Crucial for Your Organization

28-05-2020 | treasuryXL | XE |

If your organization deals at all with international currencies, then it will have some degree of foreign exchange risk. Volatility in the currency markets and global events can lead to drastic changes in currency values from day to day, and these shifts can in turn have substantial business impacts.

Some organizations may not have the expertise and resources to formulate foreign exchange policies and risk management strategies, while other organizations might have measures in place that haven’t been updated to reflect their current risk profile. Or maybe a business is under the impression that their foreign exchange risk isn’t as serious as it is, and that other aspects of the business should be of higher priority.

Any organization that works with international currencies in any capacity will face foreign exchange risk, but there’s no one-size-fits all solution: your organization’s risks will be unique to your operation, and an effective risk management strategy will need to be tailored to address your risk profile.

Keep an eye on this blog: we’ll go into further detail about assessing your organization’s foreign exchange risks and developing your own plan in the coming weeks. Today, we wanted to start off the conversation with a look at some of your business’s potential foreign exchange risk factors.

Is your organization making these risk management mistakes?

Whether your business lacks a foreign exchange risk management plan altogether or you’re looking to enhance your existing procedures, it can be difficult to know where to begin.

Below are some of the most common—and costly—foreign exchange mistakes that businesses make. Take a moment to read through them, and consider where your organization falls.

  1. Not understanding your foreign exchange risk level. Do you know if your organization faces any foreign exchange risk? How much? What are your risk factors? What are the potential impacts to your business? Many businesses (particularly smaller ones) don’t know the answers to these questions. Without a proper, thorough risk assessment, your organization could be exposed to risks you haven’t even considered.
  2. Not having a foreign exchange risk management policy. After the risk assessment, the next step for your organization is crafting a comprehensive risk management policy that addresses your potential foreign exchange risk factors. Without a policy, your organization would only be able to react to problems after they’ve already happened and potentially caused damage.
  3. Focusing just on the rates, at the expense of other factors. Exchange rates are one of the most important aspects of foreign exchange, but they aren’t the only important thing. When assessing foreign exchange providers, don’t just look at the rates they offer. Look at the other services they offer and whether they can benefit your business. And be discerning: if something sounds too good to be true, it’s possible that it is.
  4. Not taking advantage of all of the risk management products available. As we said above, every organization is different. A strategy or solution that works for one business might not be the best one for you. Take your time when speaking with foreign exchange providers and make an effort to discuss all of their product offerings.
  5. Getting overwhelmed by complex administration. If your organization is responsible for handling a high number of transactions, the day-to-day processes could be distracting from the bigger picture (and potentially, bigger issues). A foreign exchange provider can help your business to reassess your processes to better suit your business’s needs.
  6. Not having a handle on compliance. Strict regulatory compliance is absolutely necessary for any business that deals with foreign exchange. But from varying national requirements to potentially time-consuming processes, compliance can be difficult for businesses that don’t have the right expertise or resources, and can lead to regulatory delay.
  7. Poor internal communication. If your team members aren’t communicating well with one another, it will be very difficult for your business to make decisions that are best for the business as a whole, and could even lead to conflicting decisions being made by out-of-sync managers.
  8. Working with a foreign exchange provider stuck in rigid processes. Just working with a foreign exchange provider won’t guarantee good results for your business. You should work with a foreign exchange provider that understands your business’s needs and offers variety and flexibility in its solutions. A provider with limited, inflexible offerings may not be able to offer your business what it needs to reduce its risks.
  9. Not shopping around for the right foreign exchange provider. Continuing from our last point, we’d like to emphasize that the right foreign exchange provider will understand your needs and have the expertise and resources to help your business achieve its goals. Don’t settle for the first provider you meet with. Take some time to explore your options and find the one that is best-equipped to aid your business with its foreign exchange risk.

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

 

 

 

 

Source

When Should I Make a Money Transfer?

14-05-2020 | treasuryXL | XE |

We’ve previously gone over why you should choose money transfer over other methods of sending money, and we’ve discussed how to start your transfer. But one question we haven’t answered is, “When should I make a money transfer?”

Everyone’s circumstances are different, and whether it’s the right time to make a money transfer will depend on you and your needs. But what we can share with you are some of the circumstances in which money transfer is the safest, fastest, and most convenient option for sending money internationally.

Sending Money to Loved Ones at Home (or Abroad)

Whether you’ve moved abroad for school or work or your loved ones have relocated to another country, there could come a time when you’ll want to send money to one another (particularly if you’re supporting your family or you have a dependent abroad). You could take the low-tech route and send money through snail mail, but not only will you have to wait quite some time for it to be delivered, there’s also the potential of it being lost or tampered with in transit.

For these types of situations, money transfer is ideal because you can trust that the money will reach your recipient quickly, and be completely secure during the trip.

Putting Money in Your Own Account in Another Country

Yes, you absolutely can transfer to yourself! If you frequently travel between your new home country and your old one, you probably still have a bank account back home. If you want to keep a sum of money in that account and continue to build your savings, you can transfer directly to your own account. You can build up your savings from overseas, and you won’t be privy to the potentially unfavorable exchange rates you might get if you waited to exchange through your local bank.

If you’re looking to maximize the amount of money you can put in your account, you could set up a Rate Alert to let you know the best time to transfer. No need to constantly check the markets—XE can do that for you.

Making International Payments

You might be making payments to another country. You could be an employer paying employees located overseas, you could be making investments, or you could be making payments for educational fees, medical bills, mortgages, or pensions. Regardless of why you need to be making the payments, using an online money transfer provider to make your payments will ensure that your payments always arrive safe and sound by their deadline.

Additionally, if you’re in a situation where you need to make these international payments on a regular basis (for paychecks or mortgage payments, for example), you can set up a recurring series of payments through Regular Payments Abroad. For just a one-time setup, you can rest assured knowing that your payments are queued up and ready to go.

Exchanging Currency

Think about the last time you traveled to another country. Did you have their currency on hand? It’s more likely that you needed to get a supply for your trip. Exchanging money at your local bank, at an airport kiosk, or at a bank or ATM at your destination are all usable methods, but they’re not the best for one reason: rates.

Banks and other currency exchange services set their own exchange rates. It’s great for them, but it might not be as great for you. The rate will favor the institution, and you might not get as much bang for your buck when you exchange.

If you choose to get your currency ahead of time with an online money transfer, however, you can trust that you’re getting the fair, honest mid-market rate. What you see is what you get: no hidden service fees anywhere.

In short…

If you need to take the money you have and exchange it to another currency, an international money transfer is the best option for several reasons:

  • You can trust that your money will arrive at its destination safe and sound, with your information completely secure;
  • Your money will arrive at its destination quickly, within a few business days (but often sooner), and you’ll know exactly when it will arrive so you can plan for any payment deadlines;
  • It’s easy to do online from anywhere, and can be initiated 24 hours a day, 7 days a week.

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

 

 

 

 

Source

Send to Receive: Money Transfer Timings Explained

07-05-2020 | treasuryXL | XE |

One of the most common questions XE receives is, “How long does a money transfer take?” As much as XE wish they could immediately come back with a definitive answer, there’s no one-size-fits-all answer for the length of time between you hitting “Confirm transaction now” and your money transfer arriving at its destination.

In general, your transfer will be completed within 1-4 business days. The reason for this range is because no two transfers are alike, and the details of your transfer—such as how you’re paying, where you’re sending your money, and the currencies you want to exchange—can all impact the length of your transfer.

Who is Transferring

XE requires you to provide additional documentation before you can make a money transfer. If they need this information from you, don’t worry: they will reach out to you by email to let you know what they need from you.

If you get this email: all you need to do is log into your account, click “Upload Documents”, and upload a copy of your passport, driver’s license, or national ID.

 

It should only take a few minutes, and we’ll let you know as soon as you’re good to go.

Where You’re Transferring

Where you’re sending your money could also have an impact. You won’t need to account for the physical distance your money is traveling (money transfer is a transfer of information), but there’s no guaranteeing how quickly your recipient’s bank can process the transfer, whether your transfer will need to travel through an additional intermediary institution, or what kind of payment method your destination might require. All of these could affect how long it takes to complete your transfer.

When You’re Transferring

You can initiate a money transfer online or in the app 24/7, 365 days a year. However, because money transfers typically run through banks and other financial institutions, they will be privy to these institutions’ working hours. So if you initiate your transfer late at night or on a bank holiday, you might see a small delay.

And it’s not just the banks: check the calendar for your destination as well. National holidays can affect your transfers in addition to bank limitations.

How You’re Paying For Your Transfer

There are three ways you can provide the money for your money transfer: credit or debit card, wire transfer, or ACH payment. The time to receive these payments will vary: both card payments and wire transfers are quick, and typically get your money to use within 24 hours. ACH payments can take a little longer to settle due to the number of parties involved in the payment.

What’s important to remember is that your payment and transfer date will not be kept secret. When you initiate a transfer, we’ll let you know the soonest possible date we can send your transfer.

Here’s what you’d see if you attempted to initiate a money transfer on April 29, at about 5:00 in the evening:

ACH Direct Debit

Wire Transfer

Credit or Debit Card Payment

Even after you’ve confirmed your transfer, XE will still be in touch. They will let you know by email when your transfer has been sent as well as when it’s arrived with its recipient. No matter what, when, where, and how you’re making your money transfer, XE provides you with the best simple, secure, and smooth experience.

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

 

 

 

 

Source

Types of Money Transfer: All About Market Orders

01-05-2020 | treasuryXL | XE |

Last week, we explored the wonderful world of forward contracts. And for those of you who wanted to take advantage of a potentially favorable current exchange rate but didn’t need to make a money transfer right away, forward contracts could have been the answer to your transfer troubles.

But what happens if you want to make a future transfer, and the rates aren’t in your favor? Are you left with no option but to just sit tight and hope that the markets eventually move towards the rate that you want?

Don’t worry, that’s not your only option. Instead, you can set up a market order that will allow you to target your ideal rate.

What is a market order?

Remember how we described forward contracts as the “buy now, pay later” transfer option? Market orders would be the “buy now, transfer later” option.

When you make a market order, you can specify your target rate at which you’d like to exchange your currencies. The current rate doesn’t matter: the markets are constantly moving, and you’ll never know when your desired rate will be live.

After you’ve placed your market order and set your target rate, your work is done, and now it’s up to the markets. Once your rate is live, your money transfer will send, allowing you to transfer currency at your ideal rate.

What’s the difference between a market order and a rate alert?

If you’ve set up a rate alert before, you might think that this sounds a little familiar. And it’s true: both rate alerts and market orders are tools that can help you improve the efficacy of your future money transfers. The difference is all in their names.

  • A rate alert is an alert letting you know that it could be time for a transfer. It informs you that the rates are in your favor, but it’s up to you whether you want to make a transfer at this time. If you regularly make transfers (for purposes like sending money to an account in another country or loved ones abroad), rate alerts will let you know when the best time to do so is.
  • A market order places an order for a future transfer. You’ll enter your currencies, amount to transfer, and desired exchange rate, and the transfer will initiate once the rate is live.

When would I want a market order?

Depending on the currencies you want to transfer and what’s going on in the world at the time, your currencies could be subject to quite a bit of volatility. If you’re contending with frequent market motion, setting up a market order can help you to ensure that you’ll be able to make your transfer at the best possible rate, whenever that may be.

Market orders are also a great option for transfers that aren’t time-sensitive. Some transfers (such as bills or educational payments) need to be made by a certain date, but if your transfer doesn’t come with its own hard deadline, you can take advantage of market orders to make the most of your money in your transfer.

How do I set up a market order?

Ready to set up a market order? It’s no more complicated than sending any other money transfer. If you don’t have an account, take just a few minutes and sign up for your free account first. If you’re already registered, visit the Money Transfers page to learn more about how you can get started.

 

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

 

 

 

 

Source