Tag Archive for: FX

4 ways to optimise currency management in times of crisis

14-06-2022 | treasuryXL | Kantox | LinkedIn |

Did you know that CurrencyCast season 2 of Kantox is now available? In the first episode of the season, we look at four must-have tools to help you optimise your currency management and protect your business from risk in times of crisis. To see all episodes of CurrencyCast, click this link.

Credits: Kantox
Source

This week’s CurrencyCast looked at the four Currency Management Automation tools you need to navigate 2022’s predictable unpredictability. Here are our key takeaways:

(1) Put cash and currency management on the same page

The tool? The first Currency Management Automation tool is automated swap execution.

Why? Because, in times of pandemic and war, “Cash is King “. A recent risk treasury survey by HSBC finds that as many as 82% of CFOs say that cash management has been the most crucial issue during the last three years—and that is unlikely to change any time soon. The point is that cash management and FX risk management need to go hand in hand, especially in the current context.

How? By automatically executing the swap transactions that are necessary to adjust hedging positions to the settlement of the underlying commercial transactions, as cash flow moments do not always coincide. Failing to automate these cash adjustments properly hinders the whole risk management process. Yet, in FX risk management, cash management related tasks need as much attention —and as much automation— as other tasks of the FX workflow, like pricing with an FX rate, collecting and processing exposure information, or executing hedges.

(2) Optimise the impact of shifting interest rates 

The tool? The second Currency Management Automation tool is a robust FX rate feeder that enables commercial teams to price with the appropriate exchange rate, whether it’s the spot or the six-month forward rate, with all the required pricing markups per client segment and currency pair.

Why? Because interest rates are shifting in many places as we speak. As interest rates change, so does the difference between exchange rates with different value dates, also known as forward points. On the one hand, if your company is based in a strong currency area like Europe or North America and you are selling into Emerging Markets, your commercial teams may need to price with the forward rate to avoid unnecessary losses on the carry. On the other hand, you can take advantage of ‘favourable’ forward points to price more competitively without hurting your budgeted profit margins.

How? Most Treasury Management Systems (TMS) are not equipped with what we call at Kantox a ‘strong FX rate feeder’ that would enable commercial teams to quote with the appropriate exchange rate, in this case, the forward rate. For that, you need a software solution that, working alongside your existing systems, provides your commercial teams with all the FX rates they need for pricing purposes.

(3) Prepare for disrupted supply chains 

The tool? The third Currency Management Automation tool is an FX hedging program that allows you to delay —as much as possible, and according to your own tolerance of risk— the execution of hedges.

Why? Right now, as we speak, global supply chains are in turmoil. Commodity prices are seeing wild swings, and the economic outlook remains uncertain. This may lead to lower visibility regarding your cash flow forecasts and your forecasted exposure to currency risk.

How? One of the most fascinating tools that we have developed at Kantox —about which we will devote a future episode of CurrencyCast— allows treasurers to create a buffer from a ‘worst-case scenario’ FX rate that you wish to protect, if your aim is to keep steady prices during an entire campaign/budget period, and you can reprice at the onset of a new period.

This buffer, created by means of conditional FX orders, provides the flexibility to leverage information from incoming firm sales/purchase orders that are hedged. Forecast accuracy is usually correlated with time. As the campaign progresses, that flexibility allows you to gain more visibility into what is typically considered the less visible part of your exposure.

Delaying hedge execution also will enable you to:

(1) Create savings on the carry if forward points are not in your favour

(2) Set aside less cash than would otherwise be the case in terms of margin and collateral requirements

(4) Protect your profit margins and cash flows

The tool? Last but not least, the fourth Currency Management Automation tool needed to tackle 2022’s predictable unpredictability is —quite obviously— a strong FX hedging program.

Why? Because you need to protect your budgeted operating profit margins and company cash flows from currency risk. You may also desire to reduce the variability of your performance as measured in your financial statements. By allowing your firm to confidently buy and sell in the currency of your suppliers and customers, you take advantage of the margin-enhancing benefits of ‘embracing currencies’.

There is an additional benefit that may prove particularly relevant these days. In the event of a sharp devaluation of your customer’s currency, if you only sell in a handful of currencies such as EUR or USD, your customer may be tempted to unilaterally wait for a better exchange rate to settle their bills. You don’t want to be in that position — and you do it by selling in local currencies in the first place.

How? With the help of a family of automated hedging programs and combinations of hedging programs designed to systematically protect your firm from currency risk. These can be personalised whatever the pricing patterns of your business — whether you face dynamic prices or you desire to keep steady prices during an entire campaign period, or you wish to keep prices as stable as possible during a set of campaign periods linked together.

The Most Common Questions About Money Transfer

22-05-2020 | treasuryXL | XE |

If you’ve never made an online money transfer before, the process can get a little confusing. From where your money’s actually going to what you’ll need to make the transfer, it may seem like there’s no shortage of complicated processes or details to remember. And if you’ve tried doing some online research, you might have felt buried by all of the information.

Planning on making a transfer soon? Let us make it simple for you. Here are the answers to some of the most common questions our customers have about the transfer process, so that when it comes time for your transfer, you won’t be held up by any last-minute concerns.

What is money transfer?

The term money transfer is a broad term that refers to any payment that doesn’t involve cash. It typically comes in two forms:

  1. Payments, such as direct deposit or swiping a debit card
  2. Transfer, such as wire transfer or online money transfer (which is what we’re talking about today)

Unlike traditional payment methods, money transfer doesn’t involve any physical exchange of money. Instead, it’s a secure exchange of information between two institutions (typically banks) that lets them know how much to take from your account and credit to the recipient’s account.

How do I make a transfer?

If you haven’t opened an account, that’s the first step. You can learn how to register in our blog here. Once you’ve signed up, here’s what you’ll need to do:

  1. Let us know what currencies you want to transfer between and how much you want to transfer;
  2. Let us know the recipient’s name and bank account information so we’ll know where to send the transfer;
  3. Enter your own payment information so we’ll know where to deduct the money from;
  4. Double-check that all of the information is correct and that you’re happy with your rate, and then confirm your transfer.

Do I need to provide any documents?

On some occasions, we may require additional documentation to verify your identity. In that case, all you’d need to do is log in to your account and provide a copy of one of the following:

  • Driver’s license
  • Passport
  • National ID

If you’re transferring a large amount of money, you may also be asked to provide verification of your source of funds. In that case, you would upload that document (typically a bank account statement or a property sale document).

The whole process will be quick and simple: if we need extra documentation, we’ll let you know by email within 24 hours of you confirming the transfer.

What countries and currencies can Xe help me transfer to?

We can transfer money to over 130 countries in every major global currency.

Will the transfer cost me anything?

Depending on the method you use to pay for your transfer, you may be charged a small service fee. However, there are no hidden fees in our transactions: everything will be clearly laid out when you initiate your transfer.

Where does my rate come from?

Our rates come from live data from the global foreign exchange markets. Since they’re updated in real time, the rate you quoted in the morning might not be the same rate you get if you try again later that evening. There are no added margins or hidden fees inside our exchange rates: you can trust you’re getting the true, honest rate.

Check out this previous blog for more information on what impacts exchange rates and how we get ours.

How do I provide money for the transfer?

There are three ways you can pay for your transfer:

  1. ACH direct debit
  2. Wire transfer
  3. Credit or debit card

Depending on which method you pick, there could be a slight difference in the cost of the transfer and how long it takes to complete. Take a look at this blog post for more information on the three payment methods.

How long will the transfer take?

Our transfers typically complete within 1-4 business days, though many of them reach their recipient sooner than that.

And you won’t be left to wonder when it’ll arrive. When you make the transfer, we’ll tell you when the transfer will be sent as well as the expected arrival date before you confirm the transaction, and receive email confirmations throughout the process.

Can I cancel or edit my transfer after I’ve confirmed it?

Yes, but the earlier the better. If you need to change or cancel your transfer, contact us by phone as soon as possible.

If you do need to cancel, there is a chance that you may incur an additional cost. This is because we purchase the currency at the time of your confirmation. Depending on how much time has passed, if the currency’s value has fluctuated, there could be a difference in the rate when we sell it back to the market. This is where the potential for extra cost comes in.

How does Xe keep my money and information safe?

We have been in the currency business for over 25 years, and keeping our customers’ money and information safe is one of our top priorities. We are owned by the multibillion dollar, NASDAQ listed company Euronet Worldwide and adhere to regulatory standards in every country that we operate in, along with having enterprise-grade security measures in place.

We hope this information has answered any lingering questions and given you what you need to move forward with your planned transfers. Ready to send your 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 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

 

 

 

 

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The top challenges that will affect your FX risk strategy in 2022

04-04-2022 | treasuryXL | Kantox | LinkedIn |

“The year of predictable unpredictability”, as The Economist calls it. But what challenges lay in store for risk managers in 2022 when it comes to their FX risk strategy?

Credits: Kantox
Source

 

1. Shifting interest rate differentials across currencies

Let’s start with the first of our challenges that will affect your FX risk strategy in 2022, namely shifting interest rate differentials across currencies. This is the result of central banks reacting to inflation and inflation expectations. This will, in all likelihood, lead to increasing differences between FX rates with different value dates—also known as forward points. Central banks from a wide range of countries have adjusted their short-term interest rates in 2021, and more are set to act in 2022: Chile, Brazil, Czech Republic, UK, Hungary, Poland, NZ, South Africa, and South Korea among others.

Is your company well-prepared to manage those shifts? Is it well-prepared to take advantage of favourable forward points? In the event of ‘favourable’ forward points, for example, when a company sells and hedges in a currency that trades at a forward premium, pricing with the forward rate would allow that company to price more competitively—without endangering its profit margins.

As Toni Rami, Kantox’s Co-founder and Chief Growth Officer says, “most companies fail to take advantage of this opportunity, either because they lack the technology to do it, or because they are not aware of it, or because of both”.

Is it well prepared to protect itself from unfavourable forward points? This is shaping up to be a key concern in 2022. It would be the case, for example, of a company that sells (and hedges) in a currency or in currencies that trade at a forward discount, like a Europe- or a US-based firm that sells, for example, in Brazil.

This company could protect itself by setting boundaries around its FX pricing rate by means of automated and dynamically updated profit-taking and stop-loss orders in order to delay as much as possible the execution of the hedges. Failure to have this mechanism in place will mean:

(a) unnecessary financial losses due to the cost of carry (a key point in 2022 given recent developments in central bank policies)

(b) too much capital tied up in terms of collateral/margin requirements

(c) not enough time at your disposal in order to fine-tune and improve your forecasts (FX surveys consistently show that CFOs and treasurers would like to have more time at their disposal to fine-tune and improve their forecasts)

2. Ongoing pressure on profit margins

Turning to the second challenge, is the ongoing pressure on profit margins. There is a clear need for better, more dynamic pricing systems, as McKinsey surveys consistently show. Does your company have a proper system to price with FX rates? On the face of it, this looks like a simple proposition. It’s not. It requires a system to fetch the appropriate FX rate with criteria in terms of:

(a) sourcing the FX rate;

(b) communicating that FX rate to commercial teams

(c) updating that rate according to time-based or data-driven criteria.

And it also requires a system to create the FX-pricing rules that your business needs. Failure to have these systems in place will likely result in not being able to properly set the pricing markups —per client segment and per currency pair— that your commercial strategy requires and not being able to adequately use the forward rate for pricing purposes.

Take, again, the case of unfavourable forward points, namely a firm that sells and hedges in a currency that trades at a forward discount, or that buys and hedges in a currency that trades at a forward premium. With the proper pricing rules in place, the firm needs to price with the forward rate. That would allow it to avoid unnecessary financial losses on the carry. In 2022, with several EM central banks preparing to further raise short-term interest rates, this is likely to be a critically important element in any FXRM strategy.

3. The uncertain FX markets outlook

Finally, the uncertain FX markets outlook is a reminder of the importance of having a solid FX risk management strategy in place in 2022. According to Citi’s latest Treasury Diagnostics survey, 79% of risk managers have exposure to non-G10 currencies, in many cases unhedged because of costs, liquidity and regulations; 60% of treasurers expect a new client base in emerging markets to be the largest driver of FX-denominated sales growth. Yet 57% of CFOs say they suffered lower earnings in the past two years due to significant unhedged FX risk (worldwide), rising to 77% in EMEA. America: 61%, Asia: 43% (HSBC survey).

This requires automated hedging programs and/or combinations of automated hedging programs. Failure to have these programs in place in 2022 is likely to mean: (a) a high variability in performance, whether it is measured in cash-flow terms or in terms of accounting results; (b) failure to adequately protect and enhance operating profit margins; (c) the possibility that your customer’s FX could turn into your own credit risk if excessive currency volatility forces them to wait for a better exchange rate to settle their bills.

Worried about your FX risk health? Take our free assessment and get a personalised insights report in minutes. 

The Do’s and Dont’s of Pricing with an FX Rate

09-03-2022 | treasuryXL | Kantox | LinkedIn |

Give up your time-driven rules for pricing with an FX rate and go for a data-driven approach instead!

In this article, we are going to highlight the challenges faced by treasurers as they seek to manage pricing risk. According to Toni Rami, Kantox’s co-founder and Chief Growth Officer: “Understanding pricing is perhaps the most crucial element in order to design a great FXRM program

Credits: Kantox
Source

Click on the image above for the corresponding episode of CurrencyCast

Pricing risk

Pricing risk is the risk that —between the moment an FX-driven price is set and the moment it is updated— shifts in FX markets can impact either a firm’s competitive position or its profit margins.

 

The natural way to reduce it is to increase the frequency of price updates. After all, the price itself is a potent hedging mechanism. But that is not an option for companies that wish to keep steady prices during a campaign/budget period or during a set of campaigns/budget periods linked together.

We will discuss this situation in further articles. Today we want to highlight the shortcomings of the most widely used criteria for pricing updates: time-driven criteria.

Shortcomings of time-driven criteria

A time-driven rule to manage pricing risk consists in setting a time frame between the moment an FX-driven price is set and the moment it is updated. It can be every 24 hours, every week, every month. Quite obviously, the longer the time to the update, the higher the risk.

At Kantox, we are convinced that this approach is arbitrary, that it doesn’t protect you against FX risk, and that it does not reflect the business or financial needs of the firm. Take the 24-hour rule. Why not 23 hours or 25 hours instead? A time-based approach does not eliminate risk: a  sharp move in markets can well take place inside a very short time span before prices are updated.

Another way to see this is that it makes it more difficult for the firm to react to favourable moves in FX markets. Take the case of a firm that prices and sells in EUR and buys in USD, using the EUR-USD currency rate as a key pricing parameter. A rise in the EUR could allow it to outsmart the competition by pricing more competitively without hurting its budgeted profit margins.

Failure to take advantage of this type of opportunity is a serious shortcoming in terms of pricing strategies, at a time when —according to consultants McKinsey— pricing is becoming a key strategic element in today’s competitive landscape.  

The alternative: data-driven criteria

At Kantox, we believe that such arbitrary time-driven rules should give way to a data-driven approach that consists of setting boundaries around an FX reference rate, such that prices are updated only if the market moves beyond the upper and lower bounds of those boundaries. The system then serves a new reference rate and dynamically adjusts the upper and lower bands around it.

If FX markets remain relatively stable, then the firm can keep steady prices, something that is attractive in many B2C setups. This approach also allows treasurers to take advantage of favourable moves in currency markets while protecting budgeted profit margins, independent of when these movements occur.

How far or close to the reference rate these boundaries are set reflects risk managers’ tolerance to FX risk. In addition, the pricing configuration can be adjusted according to the goals of management in terms of:

  • Setting the pricing markups per client segment and per currency pair that the business strategy requires.
  • Selecting the tenor of the FX rate used in pricing. Do you wish to price with the spot rate? Or with the three-month or six-month forward rate instead? If your company is based in a strong currency area such as North America or Europe, and it sells into Emerging Markets, pricing with the forward rate will protect it from adverse interest rate differentials. Firms that lack this possibility may be tempted to apply too drastic markups, thereby unnecessarily damaging their competitive position.

While most Treasury Management Systems lack what we call a ‘strong FX rate feeder’, Currency Management Automation solutions —working alongside your existing systems— allow finance teams, among many other things, to set up an efficient data-driven solution to manage all the aspects of pricing with FX rates, including pricing risk.

Worried about your FX risk health? Take our free assessment and get a personalised insights report in minutes. 

The four expectations of Currency Management Automation

14-02-2022 | treasuryXL | Kantox | LinkedIn |

With FX volatility intensifying and exposing companies to even greater currency risk, treasurers & CFOs are faced with many challenges as they look to step up their FX risk management strategy. The key to this is currency management automation, but what are the critical problems an automated solution needs to solve to become a worthwhile tool in your treasury kit?

Click on the image above for the corresponding episode of CurrencyCast

The four main expectations of currency management automation for CFOs and treasurers are:

  1. The need to improve time management
  2. To remove operational risks
  3. To improve the efficiency of treasury operation
  4. To place themselves in a position to make a strategic contribution in terms of enhancing the value of the firm

Challenge 1: Improving time management

According to the 2021 HSBC Corporate Risk Management survey, 55% of treasurers say FX risk management takes up most of their time; and 44% find that automation frees up time. Throughout the FX workflow, members of the finance team manually execute many tasks. These are repetitive, time-consuming and add little value. The French have a wonderful expression to define those tasks: they call them chronophage — literally, they eat away your time. With more time at their disposal, treasurers could focus on more value-adding activities, such as improving and fine-tuning their forecasts.

Challenge 2: Removing operational risks

Throughout the FX workflow, operational risk is omnipresent. Operational risk is the risk that inadequate or failed internal processes can pose to your business. Take spreadsheet risk. From the moment an FX rate is sourced for pricing purposes to the budgeting process, and all the way to the cash flow moment of the post-trade phase, dozens, hundreds, perhaps thousands of spreadsheets circulate across the enterprise, magnifying the risk of manual data input error.

A recent Citi Corporate Treasury survey showed that 80% of FX risk managers remain reliant on Microsoft Excel. In our conversations with CFOs and treasurers, we noted that often, a handful of people or even sometimes a single individual is in charge of executing most –if not all– the tasks of FX risk management across the entire enterprise. These enterprises can often comprise of subsidiaries, each with its own set of currency pairs. This is the very definition of key person risk.

Taken together, spreadsheet risk and key-person risk are part of operational risks that can cause serious damage to your FX risk management strategy.

Challenge 3: Improving the efficiency of treasury operations

According to this same Citi Corporate Treasury survey, efficiency gains in treasury is the number one expectation of technology. There is a myriad of ways in which the efficiency of treasury operations can be improved in FX risk management.

Consider most Treasury Management Systems (TMS) shortcomings, even those with FX capabilities. Looking at the FX workflow, most TMS are incapable of proactively helping risk managers execute their tasks. Why though?

(a) They lack a robust rate feeder that allows the business to price with the forward rate when forward points are in favour or ‘against’.

(b) They are adequate for balance sheet hedging, but they fail to capture the type of exposure needed in cash flow hedging (e.g. forecasted exposure for individual campaigns/budget periods in static hedging; forecasted exposures for sets of campaigns/budget periods linked together for layered hedging etc. ),

(c) They lack the level of automation –during the cash flow moment of the post-trade phase of a hedging program– needed to efficiently handle the adjustment of hedges to the underlying cash flows.

Challenge 4: The need to make a strategic contribution in terms of enhancing value

HSBC’s survey showed that only 23% of treasurers see themselves as ‘best-in-class’ when it comes to FX hedging. With FX risk firmly under control thanks to a family of automated hedging programs and combinations of hedging programs, CFOs and treasurers would be in a position to:

(a) Diminish the variability of corporate performance
(b) Secure and enhance operating profit margins
(c) Improve the competitive position of the firm
(d) Make more efficient use of invested capital by boosting the sales/capital ratio and by minimising the amount of capital that needs to be set aside for collateral and margin requirements

Improving time management and removing operational risks are the most visible, the most tangible expectations of currency management automation, but they might not be the most important ones. Much more important for your company is to be in a position to improve the efficiency of Treasury operations and to make a strategic contribution towards enhancing the value of the firm.

CurrencyCast | Episode 1 – The 4 Expectations of FX Automation

26-01-2022 | treasuryXL | Kantox | LinkedIn |

It’s finally here! CurrencyCast, our new podcast, is live.  Every week, we’ll provide bite-sized tips and expert insights to help you better manage foreign currencies and optimize your P&L results.

Click on the image above to watch the first episode: The 4 expectations of FX automation

This week, we offer our view on the make-or-break FX challenges treasurers and CFOs will face in 2022. Last year was a highly unpredictable year in terms of currency volatility and this year looks to follow a similar pattern, especially with a sharp shift in interest rates.

But how can you protect your business and profit margins from such instability and uncertainty? Our FX expert and writer, Agustin Mackinlay, outlines his expectations for shifting interest rate differentials across currencies, ongoing profit margin pressure due to rising costs and more during this episode.

He’ll provide insights on how to handle each issue so you can make more informed decisions for your FX risk strategy in 2022.

Head to your preferred channel and catch episode two, where we look at the: 𝐓𝐨𝐩 𝐜𝐡𝐚𝐥𝐥𝐞𝐧𝐠𝐞𝐬 𝐭𝐡𝐚𝐭 𝐰𝐢𝐥𝐥 𝐚𝐟𝐟𝐞𝐜𝐭 𝐲𝐨𝐮𝐫 𝐅𝐗 𝐬𝐭𝐫𝐚𝐭𝐞𝐠𝐲 𝐢𝐧 2022. 

CurrencyCast | A podcast by Kantox

20-01-2022 | treasuryXL | Kantox | LinkedIn |

Introducing our new weekly FX podcast, CurrencyCast! A no-holds-barred series on the urgent foreign exchange challenges facing treasurers and CFOs today.

Introducing our new weekly FX podcast, CurrencyCast! A no-holds-barred series on the urgent foreign exchange challenges facing treasurers and CFOs today.

Every week, FX writer Agustin Mackinlay gets candid about what finance departments are doing wrong when managing their currencies and risk. He’ll provide bite-sized insights to help you better understand your FXrisk and push your treasury to the next level.

It’s an FX masterclass, all in under 10 minutes!

Mark your calendar for January 26th at 10am (CET) and subscribe to our YouTube channel to be one of the first to access our new series.

Subscribe now for the CurrencyCast!

International Mass Payments for Growing Businesses

23-12-2021 | Xe | treasuryXL | LinkedIn |

Streamline your payment processes, and improve international business partner relationships. Spend more time delivering on your clients’ needs.

Business process outsourcing and business process automation are not new business models. Yet traditionally, they have been targeted at high-volume, manual tasks like data entry, document processing, and bookkeeping. Delegating international transactions to a mass payments service provider like XE saves your business, and often your recipients on each completed transaction.

One of the many benefits of working with a payment service provider which specialises in international money transfer is that we provide services based on transaction volume. A small business will often just need help to expedite the fundamental payment administration and remittance processes. a large business with significantly more concurrent transactions will typically prioritise access to a scalable payments platform that can integrate with their core financial systems.

The executive appeal of subscribing to a mass payments API through a financial services business like XE is that it provides measurable benefits, such as:

  • Cost containment by streamlining payment tasks

  • Greater efficiency and reduced errors

  • The ability to focus full-time employees on more strategic, high-value tasks

  • Reduced training and technology overhead

  • Opportunities to take advantage of volume-based discounts

Is your business looking to find savings opportunities by paying multiple international suppliers, contractors, or employees? Simultaneous payments triggered at optimal exchange rates minimises the impact of unpredictable currency value fluctuations on your bottom line. You can also initialise bulk payments when you feel the time is right, be it after business hours or on weekends.

The Right Payee, in the Right Currency, at the Right Time

XE Mass Payments services are can be made securely to beneficiaries in over 220 countries and territories, in any of 139 currencies. One of our clients increased the efficiency of their international remittances from two days to a mere five minutes.

Consider all the productive work, collaboration, and planning which can be done in those rescued hours which would have been otherwise spent filling out forms, routing payments, and reconciling accounts.

Are you ready to streamline your payment processes, and improve your relationships with your business partners overseas? Do you want to minimise administrative tasks, and spend more time delivering on your clients’ needs?

XE Mass Payments: A Proven Platform from the World’s Trusted Currency Authority

XE Mass Payment API and related services:

  • Are on par with the banks in terms of security, privacy, and regulatory compliance.

  • Rival or exceed bank services in terms of speed. We work to avoid intermediary banks wherever possible.

  • Are less costly for your business, and generally don’t carry recipient fees.

  • Are an excellent way to reduce manual keying errors.

  • Are available to your business on your schedule, during the week or on weekends.

  • Can help you qualify for discounts for prompt payment (such as 2% within 10 days)

  • Can be contracted as a stand-alone online managed service, or as an integrated API solution to interface with your company’s financial ERP and accounting applications.

  • Are a great way to avoid pitfalls many companies make when doing business with trading partners in emerging markets. Late or inaccurate payments to employees, contractors or suppliers are bad for your company’s reputation and can be disruptive to the natural flow of your business.

Here are some additional details about our Mass Payments offering.

Mass payments services are packaged for your company based on:

  • The countries where your suppliers, employees, and other beneficiaries are located

  • The volume of payments you manage per month

  • The channels through which your business payments flow, be it through our APIs or our managed service

  • Any advisory or foreign exchange services which your company needs, be it expanding your payments to emerging markets, risk management, market orders or forward contracts.


Tame the ghost! Cancellations & currency management in Travel

20-12-2021 | treasuryXL | Kantox | LinkedIn |

How to automate the FX treatment of cancellations

It is no secret that the wave of cancellations following Covid-imposed travel restrictions has been a nightmare for travellers, airlines, hotel chains and tour operators alike. In the United States alone, cancelled domestic flights peaked at 137 thousand in April 2021. Largely due to cancellations, air traffic in Europe in 2021 was barely equivalent to 43% of the level seen before the pandemic.

Given the amount of time and resources devoted to adjusting their refunding policies, many players in the industry are still scared by the ghost of cancellations. But is that fear warranted? Not when it comes to FX management. This is because Currency Management Automation gives travel companies the tools to minimise the P&L impact of cancellations.

When it comes to FX management, the message is crystal clear: the ghost can be tamed.

Cancellations and FX exposure

FX risk management is a process in three phases: the pre-trade, the trade and the post-trade phase. Cancellations are an important element of the pre-trade phase, when the exposure to currency risk is collected and processed. Now, the type of exposure and the way it is managed depends, crucially, on each business’ pricing dynamics (see: “The hidden secret behind the different types of FX exposure”).

In the Travel world, dynamic prices are the norm (see: Currency Management Automation in Travel Distribution). OTAs, Bed banks, Hotel chains, DMCs and others frequently update their FX-denominated prices, and their cash flows are at risk from the moment of the bookings till settlement. For this reason, most Travel distribution firms apply micro-hedging programs that take those ‘firm commitments’ as the key FX exposure item.

This is where cancellations kick in. A cancelled FX-denominated booking diminishes the exposure to currency risk if the corresponding hedge has not been executed, or if an already executed trade is closed out at the same FX rate. Otherwise, there would be a situation of over-hedging. Manually adjusting hundreds or thousands of individual pieces of exposure to their corresponding hedges can quickly become an impossibly complicated task.

Taming the ghost in FX-related cancellations

Currency Management Automation provides treasurers with a number of tools to tame the ghost of cancellations. The first line of defence is to include —as part of business rules defined in the process of FX automation— an automatic cancellation rate. For example, if managers set an average cancellation rate of 10%, Kantox Dynamic Hedging® will hedge the remaining 90% hedge of the bookings.

As more information becomes available, this cancellation rate can be refined and adjusted by management when it so desires. While it is good practice to try and anticipate events, perfect accuracy cannot be expected in matters related to travel cancellations, especially in the current situation. This is why a second line of defence is provided by what our FX automation software takes as ‘negative entries’, a more efficient way to deal with cancellations. Let us briefly see how that works.

An entry is an individual piece of exposure. As part of the implementation phase of the software, risk managers establish a set of business rules that include —for each currency pair— the accumulated value of the entries they wish to hedge. These instructions also include a rule for setting negative entries from their own ERP, Booking Engine or Data Lake in the event of cancellations. API-transmitted negative entries automatically cancel the corresponding FX exposure.

But what happens when a negative entry is pushed after the corresponding hedge has been executed? Not much. Because travel-related FX exposure typically includes hundreds/thousands of individual transactions, new positions are constantly entered for the same currency pair and value date. The more granular the information included in these entries, the more accurate the FX hedging process, and the better the traceability of each piece of exposure.

Conclusion: speed is the name of the game

As the effects of the global pandemic still loom large, the ability to quickly process cancellations is a must for airlines, hotel chains and wholesalers in general. FX management is an integral part of this process — and it relies mostly on automated micro-hedging programs for bookings or ‘firm commitments”.

These micro-hedging programs, in turn, automatically treat cancellations as a key element of the ‘pre-trade’ phase of exposure management. If your aim is to tame the ghost of cancellations —while relieving the finance team from performing repetitive, resource-consuming and potentially risky manual tasks—, FX automation is the starting point.

The time to act is now!

Foreign Exchange Hedging – Putting More Flow into Your Cashflow

16-12-2021 | Xe | treasuryXL | LinkedIn |

Volatility in the market creates hedging opportunities. You can more accurately forecast margins, and have peace of mind knowing your costs won’t increase.

Any business that imports or exports goods or services have a foreign exchange requirement. Depending on how large the volume of their orders and/or sales, foreign exchange can significantly impact gross margins and has the ability to derail profit.

Importing costs fluctuate with the value of the local currency – for example, the New Zealand dollar (NZD). In the past 5 years, the NZD has moved by an average of 8% per year. In that same timeframe, if your suppliers either increased or decreased their prices by this amount, most people would do everything possible to try and mitigate the downside. This is a primary value-add of foreign exchange traders and brokerages that have the best interests of their clients in mind.

How to hedge

Volatility in the market creates hedging opportunities. By hedging, you are able to more accurately forecast margins, and have peace of mind knowing your costs won’t increase. This allows you to focus on your core business functions, be they manufacturing, distribution, or otherwise.

A forward exchange contract (FEC) allows you to buy or sell a defined amount of foreign currency on a given date in the future at a defined rate. The disadvantage of an FEC is that you may miss out on favourable market movements. However, since consistently accurate crystal balls aren’t standard issue for any ForEx advisor, the hard part is knowing where the market will go.

Experience, expertise, and depth of information resources are two of the differentiating factors between XE and our competitors.

What stops hedging?

Hedging challenges arise when your forecasts aren’t reliable, and you receive inaccurate information from sales or production advisors. Or perhaps you are running a lean supply-chain and don’t want to commit tying up cash flow to an FEC.

You can incorporate hedging into your budgeting to ensure your costed rates are covered. This prevents a situation where the currency is lower than what you’ve budgeted, and potentially a loss is being made each time you purchase FX.

For exporters, there is even less appetite to hedge. This is partly because the NZD has been strong over the past 5 years against most currencies.

The importance of interest rates

Every country wants their currency lower to attain more from exports. You will hear New Zealand’s Reserve Bank (RBNZ) say they want the currency lower. In their view, having the NZD/USD rate at 65c instead of 75c is a major positive. This isn’t what importers want to hear, but it’s the reality of the foreign exchange markets.

Interest rates dictate currency movements. The RBNZ pays particular attention to inflation, wages, GDP and employment data to make their decisions. But, the NZD is at the mercy of international reserve banks, including the US Federal Reserve and the ECB (European Central Bank).

Conclusion

Volatility is here to stay. Big swings in the market will persist. It’s almost impossible to predict where the markets will move. Yet XE has the people, processes and technology to give your business the best odds of success.

It’s unfair to judge yourself on attaining the very best rate when hedging foreign exchange. Our mantra is to empower businesses to compete to their full potential in international markets.

XE works with over 6,000 clients throughout New Zealand, and several thousand more around the world to help manage foreign exchange requirements to minimise fluctuations on margins. It would be our pleasure to advise you on how to mitigate the impact of currency on your business’ cash flow.