Improving Internal Communication to Lower FX Risk

20-08-2020 | treasuryXL | XE |

Poor internal communication can lead to businesses not making the right decisions for the business as a whole—and it can even increase foreign exchange risk.

Poor communication. It’s something that many of us have experienced in all facets of life. At best, poor communication will cause confusion and irritation. At worst, poor communication could progress to costly misunderstandings.

In the business world, internal communication is the key to a cohesive, productive organization. Unfortunately, many organizations around the world have little to no communication between teams. Sometimes this is a result of the organization being large or having recently undergone significant growth. It can also be the result of people believing that certain processes are only the responsibility of one department.

In reality, foreign exchange risk can affect the entire business, and poor internal communication is one of the most common mistakes that can increase a business’s exposure to FX risk. But what’s the solution?

How does poor communication add to foreign exchange risk?

When businesses operate in silos rather than as one collective unit, it’s very likely that they aren’t making decisions with the bigger picture in mind. Poor communication between units means that units are unlikely to have a clear picture of just how their particular operations
and currency market exposures factor into the company’s overall risk level and exposure.

If the poor communication is allowed to spread to decision-making, this could lead to businesses making autonomous decisions about transactions and risk management that aren’t consistent with the business as a whole, and could ultimately undermine other parts of the business. One example of this could be supply chain managers hedging out the risk of higher import prices without taking into account the sales department’s expected revenues from overseas.

Ultimately, your business’s FX goals should be to get the best possible rates for your international payments and minimize your risk exposure. Without effective communication, it will be very difficult—if not impossible—to accomplish this. So, how can you improve your organization’s communication?

How to improve your organization’s communication

There are two parts to this: you should prioritize internal communication, but also make a point to have strong communication with your FX provider. Internal communication, as we’ve discussed, will help your organization to make decisions that are best for the business as a whole, while communicating with your FX provider will help you to effectively resolve issues as they come up and prevent potential issues from arising.

Earlier in this series, we advised you to work with your FX provider to develop a comprehensive foreign exchange risk management policy. Having this policy can address communication issues in the following ways:

  • You and your team will better understand every aspect of your organization’s risk exposure.

  • You can then develop and implement processes to address said risk exposure on a holistic and company-wide basis.

  • You can establish protocols and procedures for how different units across the business should collaborate and communicate, in order to reduce the risk of issues arising as a result of miscommunication.

On one final note, it’s also important that you consider how you can communicate with your FX provider—not just on a day-to-day basis, but in the event that an unexpected issue arises or you need additional assistance with something. When searching for the right provider, take this into account.

Consider:

  • Do they offer phone-based or web-based assistance that you can utilize during any hour of the day?

  • Will there be one person or team as your designated point of contact?

  • How will they provide you with the information you need to make proactive decisions?

These questions could help you to find the provider that’s the right fit for your operation and your currency 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 multi billion-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

 

 

 

Scoren met treasury in kleinere organisaties

| 19-08-2020 | treasuryXL | Pieter de Kiewit

Kosten besparen, business kansen creëren en risico’s verkleinen, dat is wat goede treasury elke organisatie kan brengen, dus niet alleen de multinationals. Als treasury aficionado zie ik dagelijks dat organisaties zichzelf tekort doen. In dit artikel maak ik graag concreet waar ik het over heb omdat ik merk dat velen het vakgebied onterecht complex vinden.

Kosten besparen

Het managen van geldstromen kost geld:

  • De bankier als loodgieter stuurt ook een rekening, vaak alleen niet zo expliciet. Deze rekening is bijvoorbeeld voor transacties en het aanhouden van rekeningen. De realiteit is dat de meeste organisaties en vaak ook hun banken geen voortdurend zicht hebben op deze kosten en dat ze voortdurend wijzigen.
  • Wat ook wel eens gebeurt is dat voor één internationale betaling even veel (per stuk) wordt betaald als voor 5.000 internationale betalingen. Dit terwijl kwantum korting van toepassing is.
  • Wat ik ook regelmatig zie is dat een bepaalde financieringsstrategie is gekozen waarbij een oplossing de markt conforme prijs heeft maar de juiste oplossing niet is. Rood staan op een rekening courant is veel duurder dan een hypothecaire lening. Vaak wordt niet nagedacht over wat de juiste oplossing is.
  • De laatste van vele voorbeelden die ik wil noemen is dat diverse offertes aanvragen bij diverse leveranciers kan leiden tot substantiële kostenbesparingen. Vaak is de huisbank best bereid een lager tarief voor een dollar deal te berekenen en zijn er velen die nog goedkoper kunnen leveren.

Het zijn simpele oplossingen maar de tijd wordt er niet in gestoken.

Business kansen creëren

De gereedschapskist van een treasurer zit vol oplossingen die het verschil kunnen maken tussen een kans verzilveren of niet. Zo zie je in bijvoorbeeld projecten organisaties of bedrijven die leveren in exotische oorden, dat de business stopt op het moment dat de klant pas wil betalen na complete levering. Dat kan te risicovol lijken of het kan zijn dat de leverancier de upfront kosten niet kan dragen met eigen middelen. Via garanties, letters of credit, borgstellingen door de overheid of projectfinanciers kan de business dan soms toch worden gerealiseerd. En besef goed, niet zo lang geleden was (equipment) leasing nog geen geaccepteerde oplossing. Nu kunnen transporteurs verladingen aanbieden en kunnen de vrachtwagen producenten meer produceren.

Risico’s verkleinen

Bij treasury en risico wordt vaak gedacht aan rente en valuta. Dat is terecht, de bijbehorende risico’s moeten prudent worden aangepakt. Een veel belangrijker risico is beschikbare liquiditeit. Goede treasurers kunnen forecasten en ingrijpen om cash beschikbaar te maken voor de organisatie. Extra faciliteiten vanuit de bank, doordacht werkkapitaalmanagement, managen van betalingstermijnen en tools als factoring kunnen het verschil maken tussen overleven of niet.

Hulp nodig?

Met deze korte opsomming wil ik duidelijk maken dat voor iedere organisatie treasury van grote waarde is. Dat kan met een expert op de payroll, met eigen boerenverstand of met een tijdelijke oplossing (Rent a Treasurer). Het gaat niet om complexe materie, wel om de bereidheid af en toe een stap terug te doen en het vakgebied te overzien.

Zullen we overleggen? Wie weet kan ik u in contact brengen met de expert die voor u het verschil kan maken.

 

 

Pieter de Kiewit

Owner at Treasurer Search

What is currency risk? (Dutch item)

| 18-08-2020 | Erna Erkens | treasuryXL |

Heeft uw bedrijf te maken met de import of export van producten of diensten buiten de Eurozone dan krijgt u te maken met valutarisico’s.

Wat is een valutarisico?

Er zijn verschillende definities van valutarisico, waaronder de volgende:

Het risico dat de valutakoers van een vreemde valuta verandert, zodat een vordering of schuld die u heeft in die valuta ook in waarde veranderd. Dit kan zowel een voor- als een nadeel opleveren.

Een valutarisico is het risico dat de winst van de onderneming beïnvloed wordt door wisselkoersschommelingen.
De omvang van dit risico wordt bepaald door twee factoren:

Het bedrag in vreemde valuta waarvoor de onderneming bloot staat aan fluctuaties. We noemen dit ook wel het valuta exposure (= het bedrag in vreemde valuta).

De bewegelijkheid (volatiliteit) van de wisselkoersen van de valuta’s waarin de onderneming zaken doet, maar hierin zijn resultaten uit het verleden geen garantie voor de toekomst.

Voorbeeld valutarisico

Er zijn verschillende situaties waarin er een valutarisico kan ontstaan. We geven alvast een voorbeeld.
Stel uw bedrijf levert producten aan een ander bedrijf in de Verenigde Staten voor USD 1000. Op het moment van levering is dit Euro 730 waard. De rekening wordt echter pas twee maanden later voldaan. Omdat de koers tussen de Amerikaans Dollar en de Euro op dat moment lager is dan bij het moment van levering is dezelfde USD 1000 op dat moment nog maar Euro 650 waard. Dit kan op grote schaal en bij grote bedragen flinke verliezen opleveren.

Manieren waarop een valutarisico kan ontstaan

Pre transactierisico
Als u als bedrijf een offerte uitbrengt of ontvangt in een andere valuta dan de Euro ontstaat er een valutarisico. Dit ontstaat doordat de wisselkoers op het moment van uitbrengen van de offerte hoger of lager kan zijn dan op het moment van acceptatie van de offerte. Hiermee kan de offerte voor uw bedrijf gunstig of juist minder gunstig uitvallen. Dit wordt een pre transactierisico genoemd.

Transactierisico
Op het moment dat een offerte wordt geaccepteerd en omgezet naar een contract ontstaat er weer een nieuw valutarisico. Op het moment dat er over wordt gegaan naar een contract ontstaat er een betalingsverplichting of ontvangst in een andere valuta dan de Euro. Het moment waarop het contract wordt afgesloten is vaak niet gelijk aan het moment van betaling.
In de tijd tussen het afsluiten van het contract en de betaling beweegt de wisselkoers van de vreemde valuta en verandert de waarde van het te betalen of ontvangen bedrag. Het valutarisico wat dit met zich meebrengt wordt ook wel een Transactierisico genoemd.

Translatierisico
Als uw bedrijf deelnemingen of beleggingen in een land buiten de Eurozone heeft ontstaat er ook een valutarisico. Deze post op uw balans is altijd uitgedrukt in Euro’s. Bij koerswisselingen zal deze post dus stijgen of dalen en zo invloed uitoefenen op uw balans. Dit wordt een translatierisico genoemd.

Economisch risico
Een Economisch risico is het risico van wijzigingen in wisselkoersen op de concurrentiepositie en de winstgevendheid van het bedrijf.Een in Nederland producerende onderneming kan een economisch risico lopen als de producten bijvoorbeeld ook in de Verenigde Staten gemaakt worden voor lagere productiekosten. Als de wisselkoers verandert waardoor de Dollar bijvoorbeeld goedkoper wordt, dalen de productiekosten in de Verenigde Staten. Hierdoor kan het bedrijf in de VS de producten tegen een lagere prijs aanbieden dan u als producent in Nederland.

Een Economisch risico is in het kort de mate waarin een valutarisico de concurrentiepositie beïnvloed.

Voorbeeld valutarisico

Het bedrijf Coolfashion importeert kleding uit China. China wil betaald worden in USD. Dat vinden Chinezen namelijk fijn. De factuur voor een collectie overhemden is USD 100.000. De offerte is gebaseerd op een koers van 1.1200. Dat betekent dat de USD 100.000 met de koers van 1.1200 in de boekhouding staat voor USD 100.000 / 1.1200 = EUR 89.285,71.

Maar dan komt het moment dat de factuur betaald moet worden. Bijvoorbeeld via Cash Against Documents (CAD). De koers op dat moment is dan EUR/USD 1.0800.

Coolfashion moet de Amerikaanse Dollars daadwerkelijk aankopen om de betaling in USD te doen. Op dat moment kosten die USD 100.000 ineens EUR 92.592,59 en is er een verlies van EUR 3.306,88.

Dat is natuurlijk heel vervelend en niet nodig.

Andersom als de koers gestegen is naar 1.1500 heeft Coolfashion een extra winst van EUR 2.329,19 (USD 100.000 / 1.1500 = EUR 86.956.52. EUR 89.285,71 – EUR 86.956.52 = EUR 2.329,19).

Maar het risico is veel te groot om de gok te wagen. Het geld moet verdiend worden met de kleding niet met de verandering van de koers.

Schat uw valutarisico in

Het is als Internationaal Handelend bedrijf verstandig om uw valutarisico’s goed in kaart te brengen om zo onnodige verliezen te beperken.

Als u deze goed in kaart hebt gebracht, kunt u hier passende oplossingen voor zoeken, bijvoorbeeld door gebruik te maken van een Vreemde Valutarekening of Termijncontracten.

Erna Erkens

 

 

Erna Erkens

Owner at Erna Erkens Valuta Advies (EEVA)


Bron

Active Liquidity Podcast – How AI Protects Payments During COVID19

| 17-08-2020 | treasuryXL | Kyriba |

Our Partner Kyriba has launched their podcast, in which the Chief Product Officer Thierry Truche shares his view on how AI (Artificial Intelligence) is essential as the third line of defense for finance chiefs, ensuring payments are protected during the COVID 19 pandemic. Even if you are a company that has strong fraud prevention processes in place, remote working conditions require AI to detect abnormal payments activity. Hear why Truche sees AI as a replacement for the collective intelligence that is more present in an office setting in this episode of the Activity Liquidity Podcast!

 

 

About Kyriba

Kyriba empowers CFOs and their teams to transform how they activate liquidity as a dynamic, real-time vehicle for growth and value creation, while also protecting against financial risk. Kyriba’s pioneering Active Liquidity Network connects internal applications for treasury, risk, payments and working capital, with vital external sources such as banks, ERPs, trading platforms, and market data providers. Based on a secure, highly scalable SaaS platform that leverages artificial and business intelligence, Kyriba enables thousands of companies worldwide to maximize growth opportunities, protect against loss from fraud and financial risk, and reduce costs through advanced automation. Kyriba is headquartered in San Diego, with offices in New York, Paris, London, Frankfurt, Tokyo, Dubai, Singapore, Shanghai and other major locations. For more information, visit www.kyriba.com.

 

SOURCE

Debunking Common Myths & Misconceptions About Online Money Transfer

13-08-2020 | treasuryXL | XE |

Online money transfer can be confusing. Luckily, we’re here to clear things up for you.

If you’ve never sent money online before, it can seem pretty confusing. You enter in your information from your home, on your computer or on your mobile phone, and your money somehow travels from your bank account to your friend’s on the other side of the world.

There’s quite a lot of information online about money transfer, but unfortunately, not all of it is accurate. Been doing your research, but not sure what to believe? Let us help you out. We’re going to share some of the most common misconceptions about online money transfer, and then let you know what’s really the case.

Myth #1: You should check the exchange rates and send money at a particular time of day.

We’ve discussed this concept before, but we think it bears repeating: the time of day you check the rates has absolutely no bearing on the rate that you’ll get. The global currency markets never sleep, and it’s likely that at any given time, something is happening that could affect the value of your chosen currencies.

There’s no objective “best time” to send a money transfer. That’s going to depend entirely on the values of your chosen currencies, and since those can change at any moment, it’s not going to be easy to determine when the rates will be in your favor. You can study the markets, but you can’t predict the future!

If you are interested in knowing the best time for your transfer, you can set up Rate Alerts for your currency pairs that will alert you when your target rate has been reached.

Myth #2: You’ll always get the same rate, so you don’t need to shop around.

On the other hand, some people think that checking the rates is little more than a formality. After all, global currency values are the same around the world, so wouldn’t the exchange rate always be the same?

You would think so, but that’s not quite the case. While the mid-market rate is the exact midpoint between a currency’s buy and sell rate (also commonly referred to as the “true rate” of exchange), not every provider offers you the mid-market rate. Many services (including banks and wire transfer providers) add margins onto their rates that will benefit them. And it’s not always made clear when you look at their rates. So before making a transfer, check our Currency Converter to see what the real rate of exchange is. You could be surprised!

Myth #3: Online money transfers aren’t as secure as bank and wire transfers.

We get it. You trust the bank to hold your money, so naturally you’re going to turn to your reliable local bank and think that they’re the most trustworthy organization to handle your money transfer.

Banks are absolutely trustworthy, but they aren’t always the best choice for handling money transfers. In addition to the unfavorable exchange rates that we already mentioned, service fees and limited working hours could lead to you paying more money for a slower money transfer.

Additionally, online money transfer providers are no less secure than the banks. At Xe, we have enterprise-grade security measures in place and adhere to regulatory standards in every country that we facilitate transfers for.

Myth #4: Money transfers are complicated and take a long time to execute and complete.

This can be broken down into two separate thoughts:

  1. The money transfer process is confusing, and it’ll take you ages to figure out how to send money.

  2. Once you’ve sent your money, it’ll take days or even weeks for your money to reach its destination.

Both false!

Signing up for an account is completely free and takes just a couple of minutes. Once you’re registered, you’re ready to start transferring, which can be initiated in just a couple of minutes online or on the phone. Want to make the process even easier? Take a look at this list of everything you’ll need to make a transfer, before you start the process.

Additionally, online money transfers travel pretty quickly. Because you’re not working within bank service hours, you can initiate a transfer any time of day, any day of the year, and your money will reach its destination quickly. At Xe, our transfers take within 1-4 business days, often arriving within 24 hours, sometimes even within minutes.

Myth #5: Money transfer is expensive.

You will need to provide the funds for your transfer. But when it comes to additional costs, online money transfer is no more expensive than a wire transfer or bank transfer—it’s often less expensive. Between the straightforward rates and lack of excessive fees, what you see is what you get when you make an online transfer.

 

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 multi billion-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

 

 

 

TIS Summer Academy

| 10-08-2020 | TIS |

Our partner is excited to present four topics that have to do with both payments and TIS.

Please join TIS for a short, but interesting learning experience and a chance to win some great prizes.

How does it work?

In order to be entitled to an academy degree, you must choose two subjects from the options below. Each topic consists of a webcast and a content piece. Watch and read each carefully.
At the end, you will receive an email with a link to a quiz which will test your knowledge.

All academy participants with the correct answers are entitled to win one of ten Amazon vouchers worth EUR 250. We look forward to welcoming you to the TIS Summer Academy!

Get started now!

Choose one of the sessions and dive into the world of payments and TIS. Enjoy the TIS Summer Academy.

 

Click here and choose

Are There Risks to Conducting International Business in USD? Part 2: Importer and Exporter Scenarios

06-08-2020 | treasuryXL | XE |

In the second part of our blog series on transacting international business in USD, we take a closer look on how it can impact importers and exporters.

American companies continue to turn to international trade as a preferred method for growing sales or controlling costs. According to 2019 World Trade Organization data, international trade comprised 25% of the United States’ GDP, split between $3.1 trillion worth of imports and $2.6 trillion in exports.

Despite one-quarter of the U.S.’s GDP coming from international business, many American companies continue to transact all their international business in USD.

Why is this?

One primary reason is that certain industries have USD-functional supply chains – such as aspects of energy, agriculture and aerospace – have USD functional supply chains. Transacting in a foreign currency could be introducing FX risk.

However numerous other global industries are not USD-functional, and many American companies still choose to transact in USD.

Industry surveys reveal that two of the most common reasons cited are either:

  • A lack of FX risk awareness at the company

  • A management decision to transact in USD as this is easiest for their business.

Unfortunately, these decisions often result in the unintended consequence of transferring FX risk.

Keep in mind all international cross-border transactions, when the two counterparties have different functional currencies, have FX risk, even if priced in USD. One party must bear the FX risk and when an American company requests to transact in USD, that company is transferring the FX risk to the counterparty.

The Real Cost of Transacting in USD

To quantify the “cost” of transacting in USD, we’ve considered two trade scenarios:

  • A U.S. importer transacting in USD with both a Chinese and European supplier

  • A U.S. exporter selling in USD to both Chinese and European customers

Looking at the 2-year EURUSD and USD-CNY charts below, the Chinese Yuan varied 12% against the USD and the EUR varied 10.2% versus the USD. This variance is the “cost” transferred to Chinese and European companies and it impacts both importers and exporters.

Chart illustrating the exchange rate from Euro to US Dollar from 24 July 2018 to 23 July 2020.Chart illustrating the change in exchange rate from Chinese Yuan to US Dollar from 24 July 2018 to 23 July 2020

A Deeper Dive into Importers

U.S. importers cite many reasons for choosing to transact their international business in USD. Each of these reasons has merit and may be appropriate for a company’s unique situation.

  • Industry standard: certain industries have USD-functional supply-chains.

  • Ease of doing so: “we’ve always done it this way”.

  • No other options: a lack of multi-currency accounting systems.

  • Supplier’s choice: the supplier says it wants USD.

  • First-time global trader: pricing in USD to focus on other trade risks.

Regardless of the reason, it does not alter the reality that:

  • Paying for imports in USD to a foreign supplier that is not USD-functional is transferring FX risk to the supplier, and

  • The supplier will need to be compensated for taking on the FX risk, most likely padding their USD price.

To illustrate the FX risk impact, the grid below shows the local currency impact of a USD payment to the Chinese and European suppliers.

Grids showing the local currency impact of a USD payment to Chinese and European suppliers

Did this FX risk impact the pricing the American importers received? 

Many importers report that their suppliers often change their USD prices—some say frequently—and almost always increase them. The most likely reason is FX. The supplier, converting the USD payable to local currency, is no longer receiving enough CNY or EUR to maintain their margins—thus, they ask for more USD. This most often happens when the USD weakens.

What Can a Company Do?

Many companies have adapted to this reality about FX risk even when paying in USD.

Some of the solutions we have seen in the marketplace include:

  • Companies asking for dual-currency invoices

  • Proactive companies paying suppliers in CNY or EUR, even if they are invoiced in USD

  • Companies asking for FX risk-sharing agreements

  • Companies embracing FX risk management and requesting local currency invoicing

A Deeper Dive into Exporters

Exporters also face the inherent FX risk in global trade as their end customers are most likely not USD-functional. Nonetheless, many U.S. companies still price their exports in USD. The most common reasons cited for this include:

  • Industry standard: i.e. USD-functional supply chain

  • No other options: accounting/ERP systems not multi-currency compatible

  • Convenience: ease of doing business to the American company’s staff

Again, regardless of the reason cited, it does not alter the reality that a company pricing its exports in USD is transferring the FX risk to the buyer. The buyer experiences the variability in the FX spot rates and will most likely:

  • Demand price discounts, or

  • Choose to buy from a competitor willing to price in their home currency

The grid below illustrates the FX risk impact transferred to the Chinese or European buyer over the last two years by the American exporter, as a result of pricing in USD.

Grids showing the FX risk impact transferred to the Chinese or European buyer over the last two years by the American exporter, as a result of pricing in USD

Has this FX risk impacted your sales or revenue forecasts?  

Many exporter sales staffs know that pricing in USD is often uncompetitive. Their biggest risk is a strengthening USD as this makes their product or service more expensive. An exporter’s sales management must weigh the costs versus benefits of transacting in USD. The risks are:

  • Uncompetitive pricing: a stronger dollar makes their product or service more expensive.

  • Payment delay risk: customers that don’t hedge may try to wait for the FX rate to improve.

  • Profit margin risk: sales teams may need to cut prices to close the sale.

  • Lost sales revenue: buyers may choose a similar product or service from competitor willing to price in local currency.

What Can a Company Do?

Many companies have recognized these market conditions and taken actions to adapt to their international customers’ needs. Strategies have included:

  • Offer pricing in local currency and take on management of FX risk

  • Offer hedging on behalf of suppliers that cannot

  • Offer risk-sharing pricing agreements

  • Open local sales offices to build stronger relationship

Wherever you are on this journey to transacting in foreign currencies, the Xe Corporate Team can be your partner and help your company manage its FX risk and international business.

Get in touch with an Xe expert and we’ll help you:

  • Analyze dual invoicing

  • Make and informed decision

  • Upskill your team and reap the benefits!

 

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 multi billion-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

 

 

 

Are There Risks to Conducting International Business in USD? (Part 1 of 2)

30-07-2020 | treasuryXL | XE |

American corporations often transact their international business in USD because they believe it eliminates FX risk. Unfortunately, this is a false sentiment.

When it comes to international business, American companies have a global advantage. The U.S. dollar (USD) serves as the world’s reserve currency. This has created a global demand for dollars and led to certain industries (e.g., energy) being globally priced in USD. Because of the USD’s global status, many American companies transact all their international business in USD—but this may not always be the best move.

American corporations—particularly smaller and middle market companies—often elect to transact their international business in USD because they believe it eliminates foreign exchange (FX) risk. Unfortunately, this is a false sentiment.

Pricing transactions in USD does not eliminate FX risk. Instead, it merely transfers it to the trade partner, because the trade partner most likely operates under a different functional currency.

When to Price in USD

When deciding whether to transact in USD, a company needs to examine its business operating environment. There are instances when pricing international business in USD is a valid strategy for a U.S. company.

Two examples of this are:

  • Industry standard: certain industries have long-established USD-functional supply chains. Some examples of these industries include aspects of energy, agriculture and aerospace.

  • First-time global traders: new entrants to global trade have other risks to prioritize over currency risk (such as counterparty risk, quality of goods, shipping, payment, and more).

Why Do US Businesses Price in USD?

Even though a vast majority of industries are not globally USD-functional, many American companies still transact their international business in USD.

The most common reasons cited for this include:

  • Perceived FX risk avoidance

  • Ease with current process

  • Internal system incompatibility

This set of circumstances falls under managerial influence. A company that continues to transact global business in USD under these reasons has made a business decision that the ease of transacting in USD outweighs the potential benefits of transacting in local currency.

However, what these companies need to understand is that transacting their global business in USD can also come with hidden costs or risks.

The Cost of Pricing in USD

American companies transacting globally in USD may be exposing their business to potentially higher costs or reduced sales and margins.

Why?

Because their trading partner is most likely not USD functional, making the USD payable or receivable a foreign currency to that company. The foreign company will need to be compensated for absorbing the FX risk; to do so, they will likely “pad” prices to U.S. importers or demand price discounts from U.S. exporters.

Industry studies estimate the cost to U.S. businesses can range from 2%-10%. Importers face inflated pricing and payment delay risk. Exporters face uncompetitive pricing, reduced margins, possible payment delays or, worse, potential lost sales.

Management Taking Control

In a globally competitive marketplace, it is prudent for a company to question why it transacts its global business in USD. Is it industry standard? Or a lack of internal knowledge and inadequate systems?

As companies strive to grow revenues and reduce costs, it is possible that transacting business in USD is having a negative effect. Is the purchasing group overpaying for goods? Has the export sales team experience lost sales to competitors pricing in local currency?

At Xe, we work every day with companies doing international business. We understand the challenges companies face when transitioning to pricing their international business in foreign currency. Wherever your business is on this transition journey, the Xe Corporate Team can be your partner and help your company manage the FX risk component of international business. Visit our Business page for more information about our products and services.

To learn more about the costs to American companies for transacting in USD, understand how this impacts importers and exporters, and see some solutions other companies have tried, stay tuned for the Part 2 in this series.

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 multi billion-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

 

 

 

Executive Briefing CFOs in the Firing Line

| 01-07-2020 | TIS |

Government-imposed sanctions on who companies can trade with and how are changing almost daily. At the same time, CFOs are becoming personally responsible for sanctions violations relating to payments – and the size of fines imposed on errant organizations is snowballing.

How, then, can finance leaders tackle these issues to minimize the risk of sanctions breaches, improve payments workflows, and ultimately, avoid severe legal consequences? Our partner TIS offers an executive briefing on this topic. Read more about:

  1. The importance of government-imposed sanctions
  2. What types of sanctions exist?
  3. Pinpointing the risks
  4. Why in-house screening matters
  5. Optimizing the set-up

Download the latest executive briefing from TIS and gain timely insights into this complex topic and an extensive list of legal expert’s recommendations in order to ultimately protect the organization against the financial and reputational damage of a non-compliance incident as well as the CFO from personal liability.

About TIS:

TIS (Treasury Intelligence Solutions GmbH), founded in Walldorf, Germany in 2010, is a global leader in managing corporate payments. The Financial Times named TIS as one of “Europe’s Fastest Growing Companies” for 2019 and 2020. Offered as Software-as-a-Service (SaaS), the TIS solution is a comprehensive, highly-scalable, cloud platform for company-wide payments and cash management. The TIS solution has been successfully used for many years in both large and medium-sized companies, including Adecco Group, Hugo Boss, Fresenius, Fugro, Lanxess, OSRAM and QIAGEN. More than 25% of DAX companies are already TIS customers.

Your world of Payments. ONE Login.

Visit TIS.biz website

Download the executive briefing here!

 

Meet our Experts – Interview Ger van Rosmalen

01-07-2020 | Ger van Rosmalen | treasuryXL

Our Expert Ger van Rosmalen has over 45 years of global Trade Finance expertise (Letters of Credit, Documentary Collections, Bank guarantees) mainly working for international banks. In addition, he is also frequently asked to conduct trainings for companies like EvoFenedex and Vesting Finance, as well as for Chambers of Commerce, and Professional Higher Education programs. His drive is to assist companies with Trade Finance solutions. To help companies to achieve their business objectives through a better understanding of profitable Trade Finance solutions and instruments, and to promote efficient cooperation between Sales, Finance and Logistics. Get to know him better:

We asked him 11 questions, let’s go!

1. How did your Trade Finance journey start?

My first job started 46 years ago at the Letter of Credit Department of a Dutch bank. I applied for the job of junior and when I answered the question of the HR manager “do you have bank blood?” with YES he hired me.

2. What do you like about working in Trade Finance?

Not one day, not one transaction is the same. I like to be challenged, finding solutions, be creative but always within the guidelines of compliance/AML rules. Assisting customers to close their deal. Education and training of Trade Finance solutions so customers understand the risk before signing a contract.

3. What is your Trade Finance Expertise?

I have a lot of knowledge and expertise in the field of Letters of Credit and Bank guarantees. How to apply those instruments, explain to people with different levels of Trade Finance knowledge about these products and how to be able to understand the risks and to avoid or exclude certain risks.

4. Do you have examples of risk mitigation, creation of opportunities and/or cost savings?

Risk Mitigation in Trade Finance can be the use of “confirmed” Letters of Credit, it means (if possible) that the bank of the exporter is taking over the (country/bank) risk of a foreign unknown bank. If the exporter can fulfill the conditions of the Letter of Credit his risk is his own bank. Creation of opportunities is my passion, drive and reason for being is this business for such a long time.

5. What has been your best experience in your Trade Finance career until today?

The change of UCP500 to UCP600 (Rules for Letters of Credit) was a big improvement for companies dealing with L/C’s. It is not that black and white anymore. My experience is how companies adapted to these new rules if you take them through these rules. People felt more confident in using these instruments and will be used for some time. Since UCP600 is already in force from 2007 it is expected that new rules are on their way. I hope my very best experience is yet to come when new rules will be launched. Trade has evolved and rules should adopt to that.

6. What has been your biggest challenge in Trade Finance?

My biggest challenge is every day being able to convince people to use these well established instruments.

7. What’s the most important lesson that you’ve learned as a Trade Finance expert?

To trust my instinct. Some deals are too good to be true or I just miss the logic of the transaction. My instinct has let me down only once in 46 years.

8. How have you seen the role of trade finance expert evolve over the years?

On the Sales side of the Trade Finance Expert I noticed corporates appreciate direct contact with an expert who has all the knowledge of Trade Finance from a sales perspective as well a from a operations perspective. You have become their trusted advisor in this field.

9. The coronavirus is undoubtedly an unprecedented crisis. In general, can you elaborate on the impact this virus has on Trade Finance from your perspective?

The use of Trade Finance instruments will be more important now that we are facing the Corona crisis, which will force exporters to look for other sometimes forgotten alternative solutions. High tech innovative solutions such as FinTech or Block Chain is still under construction and exporters do not have the time to investigate those solutions. They need to generate turnover and need quick available products such as Letters of Credit to support their business. I embrace those new techniques but that will not have my priority the coming period of uncertainty. People tend to say Letters of Credit are old fashioned, time consuming and too much risk. I disagree if you understand what is expected of you as exporter. If you know how to communicate with your buyer and your bank you will experience the comfort of those almost forgotten products. It is imperative that you understand and educate yourself in this field or hire experts to support you.

10. What developments do you expect in corporate trade finance in the near and further future?

It will depend on how the financial world will be able to join forces and create workable solutions. Not several small groups of banks developing their system so still fragmented but one solution workable for all parties involved in Trade Finance. If you look at the Bank Payment Obligation (BPO) it is the example how we missed the opportunity to develop one unique system. Corporates dealing with different banks and other counterparts needed several systems offered by different banks or other parties. If suppliers of the Fintech or Blockchain solutions are learning from the BPO adventure they now have the opportunity to change the world of Trade Finance significantly. Digitalisation of Trade Finance is the future whether that will be the near future or somewhere in the future is the challenge of all parties involved.

11. What is your best advice for businesses without a Trade Finance expert?

In my opinion you cannot rely on knowledge outside your company only. It will make you vulnerable. Outsourcing is not the magic word. Educate and train yourself and your staff so you understand the impact of your decisions and take responsibility.

 

 

 

Ger van Rosmalen

Trade Finance Specialist

 

 

 

 


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