Tag Archive for: riskmanagement

How Can Xe Help Your Business?

08-10-2020 | treasuryXL | XE |

From simplifying international payments to monitoring the currency markets, Xe is ready to help your business make the best foreign exchange solutions.

At Xe, we don’t just facilitate individual money transfers between individual banks accounts. While we do help our customers make money transfers to pay bills, prepare for international travel, or send money to loved ones back home, we also provide a number of money transfer products and services to our corporate customers.

Each year, over 13,000 businesses in over 100 sectors turn to Xe for help managing their international money transfer and foreign exchange processes. What can Xe help with? We’d be happy to tell you.

Save on currency conversion costs

We’ve said this before, but it always bears repeating. When you’re consistently making international payments or exchanging to foreign currencies, if you aren’t prudent in your transfer method, you can easily find yourself on the hook for a lot of additional costs. Bank fees, wire fees, unfavorable exchange rates, and hidden transaction fees are just a few of the extra costs you can potentially incur when making international payments.

Don’t have time to watch the markets? Don’t know how to analyze market volatility, or figure out the best time to transfer money? No problem. When you work with Xe, we’ll watch the markets for you. We’ll help you to get the best exchange rates possible for your transfers, and let you know when you should be making your payments to minimize the added costs. You can also integrate our Currency Data API into your existing systems to easily access exchange rates for your chosen currencies.

Simplify and effectively manage your payments—all of them

When you’re making frequent—and numerous—global payments, it’s important that they clear on time, are free of any errors, and meet all necessary regulatory compliance standards. Fortunately, this isn’t something that has to be done manually and payment by payment. Our systems can help you to simplify and streamline your international payments, without sacrificing quality in the process.

Our Mass Payments solution will enable your business to process, execute and deliver multiple payments on a global scale from a single gateway or integrated into your own systems, easily and securely. This solution will vastly reduce the amount of time and manual work in your international payments, which will then allow you to devote more time and resources to other areas of your business.

Get advice from someone who knows the markets

If you don’t have a background in foreign exchange, trying to make sense of the financial markets can seem an impossible task. And when you’re a business owner, you likely don’t have the time to sit down and familiarize yourself with every minute detail of the foreign currency markets.

We’ve been in the currency business for over 25 years. We know the markets, and we can help you to understand them, recognize the issues they may present to your businesses, and determine the best solutions to navigate the markets and make the best decisions for your business.

 

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

 

 

 

Should you choose Xe or wire transfers to send money abroad?

01-10-2020 | treasuryXL | XE |

We’ll take you through the process step by step to help you figure out the better option.

So, you’re looking to send money overseas. Obviously you’ve ruled out physically sending money via snail mail, so that leaves you with electronic methods. If you’ve done any online research, the most common terms you’ve probably come across are money transfer and wire transfer. You might’ve even seen them used interchangeably. Is there a difference?

Yes, there is a difference between wire transfer and online money transfer (also known as electronic funds transfer). While both methods transfer money from one bank account to another by electronic means, they’re not quite the same—and you won’t get quite the same experience with the two methods. We previously discussed the difference between transferring money with Xe and the banks. Now, it’s time to give the same attention to wire transfers. Where are you better off?

Which method is faster?

Both methods will take money around the world in a short amount of time. Wire transfers typically take around 3-5 business days, but this can vary. If the wire transfer involves an exotic global currency, if the transfer requires travel through intermediary banks, or you’re sending money to a country that doesn’t have a strong banking relationship with your country, the wire transfer could take even longer.

At Xe, your transfer will typically take 1-4 business days, though the majority of our transfers complete within 24 hours. Or, if you’re sending money to one of these countries, your money will reach its destination in just a few minutes. The timeframe will never be a mystery; we’ll communicate the expected arrival date before you confirm your money transfer, and we’ll communicate with you throughout the process so you’ll never feel that your money is lost in electronic limbo.

How much will they cost you?

Yes, both methods will cost you some money on top of the money that you’re already supplying to transfer. However, the costs will not be the same from provider to provider. You will be charged one fee to send a wire transfer. You may also be charged a fee from the receiving bank upon the money’s arrival. If the money travels through intermediary institutions, those institutions may also charge you a fee. And it’s not just fees: wire transfer providers can set their own exchange rates, and often add margins to those to boost their bottom line. Adding those together…you’re suddenly paying a lot more than you thought! When you transfer money through Xe, you will be charged one fee for your transfer. That’s it. One service fee, and it will be clearly displayed on our confirmation screen when you transfer money through the Xe app. You can even choose whether you’d like the fee to be taken from what you send or what your recipient gets, so there’ll be no mystery around how much money will make it to your destination.

What’s the process like? Is it convenient?

Some banks and providers have online wire transfer capabilities. But more often than not, you’ll need to go to the physical storefront, wait in line, and fill out the form each time. You’ll need to make sure that you have all of the information you need, otherwise you’ll be making another trip out to the wire transfer provider. Is it the most difficult thing in the world? Well, no. But could it be more convenient? Definitely.

The best part of online money transfers? You can do them anytime, anywhere. Just head to Xe.com or open the Xe app from your couch, your bed, or wherever you have internet access to initiate a transfer 24 hours a day, 7 days a week. You can enter your information in the secure online form and save it if you’re planning on making future transfers to the same recipient, and if you have any questions later on you can easily reach out to customer service for support.

Overall?

Both wire transfers and Xe money transfers are fast, secure, reliable ways to get money abroad. However, if you’re looking for quick arrivals, minimal fees, and an easy-to-navigate transfer process, we think you’ll be happy sending money with Xe.

 

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

 

 

 

How to Effectively Track Your Expenses

24-09-2020 | treasuryXL | XE |

When you look for advice on how to create a budget or save more money each month, the first step is usually to track your expenses. But how do you really do that?

Tracking your expenses is a great way to start creating your personal budget, but it’s also a great way to:

  • Spot patterns in your spending, including potential problem areas
  • Be more conscious of your day-to-day spending and prevent impulse purchases
  • Set realistic financial goals
  • Reduce stress surrounding your finances.

But how exactly do you track your expenses, especially when you have a lot of them? Are you supposed to track everything down to the $2 you spent on a drink at the vending machine? Where do you start? How often should you track your expenses? Tracking your expenses sounds straightforward enough, but when you don’t know where to start, it can feel like an overwhelming task. We’re here to help. Keep reading to learn more about how to track your expenses and where to go once you’ve done that.

Write it all down

Yes, all of them. Don’t just track the big purchases or the regular payments. Everything from your rent or mortgage payments to your occasional takeout order needs to be tallied up. Think of it this way: does it cost you money? If so, add them to the list, even if they don’t feel like traditional “expenses”. We recommend splitting your list into three categories: daily, weekly, and monthly. This will help you to understand your short-term, in-the-moment spending habits as well and also keep track of spending over time, to better spot patterns.

How you do it doesn’t matter. Some people prefer the old-school pencil-and-paper method, while others prefer to use spreadsheets or computer programs. There are even budgeting apps that you can use to track your expenses and generate a budget. Choose whichever method you’re comfortable with and know you’ll stick with, and get started!

Break them into categories

If you’ve ever sought out advice on saving money, it’s almost certain that you’ve been advised to remove or reduce your unnecessary expenses and purchases. And it’s true: not all expenses are created equal. Some are essential to keep yourself alive and well, while others might be technically unnecessary but built into your current routine and lifestyle, while others are in-the-moment impulse buys. Budgeting advice typically dictates setting aside a certain amount of money for the unnecessary but enjoyable purchases each month after you’ve already established how you’ll cover your essential expenses. In order to differentiate between the three, we recommend further categorizing your expenses. Consider using the following categories:

  • Bills and other essential regular payments (such as rent or mortgage payments, student loans, car payments, credit card payments, insurance, or utilities)
  • Nonessential regular payments (such as streaming platforms, online subscriptions, gym memberships, and other services)
  • Groceries
  • Eating out or ordering in
  • Gas
  • Prescriptions or medical costs
  • Pet costs (if you’re a pet owner)
  • Charitable donations
  • Personal spending (such as online shopping or buying other goods or services solely for enjoyment)
  • Caring for your family or sending money to loved ones

With each expense type, consider: is this necessary? If not, is this something that brings me happiness or fulfillment? What would happen if I didn’t spend money on this? These questions will help you to determine where these expenses fit in your overall budget.

Look for patterns

Granted, your expenses won’t always be exactly the same. For example, winter holidays mean that you’re likely to spend a little more than usual in December, while you may have some months without many social gatherings or events that necessitate spending money. However, general trends will pop up. For example, do you always stop at the same coffee shop before work? Do you typically order takeout on Fridays? Do you pay for 4 different streaming services, but only consistently use one? How many online purchases did you make this month? How much is your old car costing you in repairs and maintenance?

Some patterns may not surprise you, but others may be eye-opening. Seeing just how much you spend each month on certain things could make you think: do I really need to be spending this much money on these things? Are there other areas in my life where I could use this money?

Use it to form smart financial habits

Now that you know what your expenses are, you’re well on your way to forming a smart, sustainable budget. Compare your expenses to your current monthly income and calculate how much is left over each month. Are you happy saving this much each month? What are you doing with the extra money?

If you’d like to have more left over each month, now’s the time to turn back to your categorized expenses and calculate where you could stand to spend a little less. You could even put “savings” down as a consistent monthly expense, and hold yourself accountable for putting a certain amount of money away each month. Just like your budget, your expenses should be revisited on a regular basis as your circumstances and spending habits change. If your current spending habits aren’t working for you, give it another go.

One common mistake is to immediately cut out all or most of your “unnecessary” spending, but just like immediately cutting out all remotely unhealthy foods from your diet, it’s likely not going to be sustainable in the long run and will only lead to resentment. You’re allowed to have fun and spend money on yourself! Tracking your expenses and creating a budget is the way to do it while still being financially responsible and planning for the future.

 

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

 

 

 

What’s the Best Way to Exchange Your Currency for a Trip Abroad?

17-09-2020 | treasuryXL | XE |

Got an international trip coming up? Need to make a currency exchange? Let us talk you through your options.

When you’re preparing for an international vacation, there’s a lot you need to remember to bring. Between your passport, enough clothes, adapters, it’s easy to fill up a few bags with just the essentials. However…it’s also important that you don’t forget to bring some money to use on your trip. Odds are, if you’re traveling internationally, you’ll need to make payments in a different currency. What’s the best way to get the money? When should you make the currency exchange?

You have a few different options for exchanging your currency. We’re going to run through your options and let you know what the best option is and what you should do your best to avoid.

4. Using ATMs and card payments

Technically, you don’t need to make any currency exchanges. If it comes down to it, you can just go to an ATM or use a debit or credit card to make your payments. But while this option might sound like the most convenient one (at least as far as your time is concerned), it’s far from the best option.

When you visit ATMs or use your card to make payments in another country (and currency), you’re going to be subjected to numerous service fees and transaction fees each time you withdraw cash or swipe your card. If you’re there for a short time and only plan on making one or two payments that might not be so bad, but if you’re planning on making numerous purchases, these fees can and will add up—fast.

3. Exchanging in person at your destination

Another common option is waiting until you enter the country, and exchanging your currency there. People typically do this at the airport or at a local bank or currency exchange store.

While this method will let you avoid the high transaction fees, it unfortunately will not protect you from unfavorable rates of exchange. These providers are free to set their own rates, and it is very likely (especially if you’re exchanging at an airport kiosk) that the rates will give you much less for your money than if you transfer elsewhere.

And from a peace of mind perspective, wouldn’t it be nice to have your money taken care of before your arrival? That way, once you arrive, you’re free to start exploring or take a rest, without having to worry about getting money on top of wrangling your luggage and figuring out how to get to your lodgings.

2. Exchanging at the bank before your trip

As we mentioned in the previous section, it’s always nice to have your currency exchange taken care of before you reach your destination. It’s one less item to have on your to-do list when you arrive, and then if something happens upon arrival, you’ll already have the money that you need.

While banks are reliable, easily accessible, and can facilitate a currency exchange for you, they still aren’t the best option. While their rates will be better than those of airport kiosks, banks still come with a few drawbacks—namely, limited working hours, unfavorable exchange rates, and transaction fees.

So where does that leave us? Well…

1. Using money transfer to get currency before your trip

We promise we’re not biased—this really is the best option. Using an online money transfer service to exchange your currency before your trip will allow you to:

  • Avoid transaction and payment fees

  • Trust you’ll get a fair exchange rate

  • Take care of your currency exchange quickly and from your own home

  • Let you relax knowing that your currency exchange has already been handled.

It’s quick and easy to make an online money transfer. You don’t need to find a physical storefront and worry about business hours—you can initiate one on the go, 24/7, 365 days a year.

 

 

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

 

 

 

Signs Your Foreign Exchange Provider Isn’t Right for You

10-09-2020 | treasuryXL | XE |

Every business is different, and so is every foreign exchange provider. How do you know whether your provider is right for your business’s circumstances? If you’ve been keeping up with our blog series on managing your company’s foreign exchange risk, you’ve likely seen us give one consistent piece of advice throughout the process: have a foreign exchange provider. Working with the right foreign exchange provider can help you reduce your business’s risk levels and improve the efficiency and efficacy of your international payments and other foreign currency dealings.

However, not every foreign exchange provider is the right foreign exchange provider. A provider can be knowledgeable, experienced and provide great customer service, but none of that matters if they don’t have the knowledge, experience, and service offerings to suit your business, its operations and its risks.

Not sure how to spot the right (or the wrong) foreign exchange provider? There are a few key qualities that you should look out for as you shop around.

What’s one of the biggest issues with foreign exchange providers?

One common problem that we see keeping businesses from effectively managing currency risk and securing the best value from transactions is a lack of flexibility. If your foreign exchange provider doesn’t offer enough flexibility in their terms, you’ll be limited in terms of what you can do.

Take hedging, for example. For some businesses, hedging would be a wise strategic decision, but not all providers offer a variety of options. You may be asked to make payments in advance or provide margin for forward positions, and not all companies are able or willing to do so. Even if your business is willing to meet a provider’s terms, they might not be best suited to your circumstances.

On the other hand, other providers could offer a wider range or more flexible credit terms that would account for your business’s needs.

What should you look out for?

We recognize that telling you to look for “flexibility” is a little too vague. When speaking with foreign exchange providers, take the time to discuss their solutions and strategies in detail and understand how rigid their processes are. Understand your business’s processes as well—this will help you to in turn know what to look for in a foreign exchange provider.

Let’s look at payment service, for example. When working with international currencies, it’s likely that you’ll need to make quick payments to different recipients in different markets, while still having plenty of time to make your transactions and ensure that everything is correct. Some foreign exchange providers may only offer one form of payment service. That could work well for them, but it could also be inconvenient or detrimental for your business. Ask your provider whether they offer different payment options, or if there’s any way to configure their existing model to fit your business.

Ultimately, you want to find the provider that can and will adjust their strategies and solutions to fit your business. Whether you’re looking for assistance with your day-to-day transactions or your long-term risk management strategies, it’s important that you feel that your provider understands your business and is offering the solutions that will best address your goals, rather than a standard one-size-fits-all solution.

 

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

 

 

 

Alternative Risk Finance Part 2 – Building the Business Case

| 09-09-2020 | Mark Roelands | treasuryXL

In this 4-Part series on Alternative Risk Financing, our Expert Mark Roelands highlights upon the importance of Alternative Risk Financing.
Part I reflected the alternatives of risk financing in the current hard insurance market. Now, Part 2 reflects upon the business case and how to build it, in order to enable decision making and finally decide whether to pursue the alternative risk financing route.
Building internal support is critical in getting to the go / no – go decision. Defining the Business Case will go hand in hand with generating internal buy-in by involving internal stakeholders like tax and legal during the analysis process. This blog will be about the business case set up, and how the relevant stakeholders should be involved during the process. The business case setup then is managed together with a companies’ internal dynamic. Let’s find out how to build the business case with the relevant components……..

Building the Business Case

As introduced in Part I, a structured framework is required in order to get to structured decision making. The framework used is the Risk Financing Framework by Roelands GRC Consulting. The main question on whether to start an in-house insurer is divided in 4 sub questions with 4 modules

1. Foundation> Achieve the risk finance objectives

What is your strategy with respect to retaining risks? What risks are you willing to retain?
As a treasury department for instance, the currency exposures are managed and hedged. To a certain degree, hedging is either too costly or priced into forwards (with limited risk transfer implications). This also applies to insurable risk. A certain level of claims can be expected which will either be within the deductible level or priced into premiums. Critical is to understand what volatility is acceptable to the organisation. Stakeholder expectations and requirements can be key determinants. What headroom is available on financing arrangements and on what percentage deviations will supervisors and auditors start to raise questions? What quarterly earnings deviation would be possible, and has Covid19 changed that position? Bottom line, in most alternative risk financing structures the corporate retention is increased, and a crucial question therefore is when a negative scenario unfolds are you able to defend the impact of the insurable risk retention?

What is the ultimate objective to be achieved? 

2. People & Organisation > Matching the organisation, policies and people

How would an in-house insurer fit within your organisation? This is about aligning internally on the conditions that need to be met for an in-house insurer. There are several countries or domiciles, and several forms of captive insurance which are possible. Within the organisation risk management resources and governance structures need to be aligned. Hence,

What form of captive would match your organisation best? 

The trend in domiciliation, which is strengthened by BEPS, is offshoring or onshoring and to choose a domicile where there is substance. A treasury centre domicile would be a good alternative, as is the HQ domicile or certain domiciles which have a big captive insurance support industry. Within Europe, this would be Ireland, Luxemburg, Guernsey or Malta. Going outside of the HQ domicile may have some obvious tax consequences that will need to be addressed with the colleagues from tax. A Cell Company could be an interesting alternative, but it is important that this is understood correctly within the organisation (more on this in Part 3 of this series). The Legal department will need to be involved, and as this will have domiciliation implications, the Tax department as well. As a larger part of risk is retained within the company, it is critical that risk management processes are directed to managing the risk, and certain functions may need to be involved as well. For instance when employee benefits is a risk to be underwritten, then HR will definitely be involved as coverage provided is key.

Depending on the type of captive that is established and in what domicile certain governance structures may need to be established (for instance in the Netherlands, the Corporate Governance Codes applied as a captive is an NV, implying 2 independent members of the Supervisory Board), service providers need to be found and external resources may need to be purchased. These will often become partners which the company will be working with for multiple years, so how will they be selected? Brokers and insurers offer their captive or alternative risk finance facilities, which may be very good, but there is a certain lock-in aspect to it.
Therefore, decisions need to be considered carefully.

3. Processes > Adaptive, effective and efficient operations

Relevant processes need to be established or adjusted to fit the new situation. From an operational point of view, adjustments will need to be made to ensure effective and efficient operations.

  • Premium setting: Premiums will be based on indications received during the business case setup and claims analysis. Furthermore, they need to be allocated to operating companies on an arms’ length basis. This will require some analytical input. Usually, a fronting insurance company is involved in taking care of premium collection and direct policy issuance. Otherwise, that will need to be done by the captive as well.
  • Claims handling: Which parties are involved in loss adjustment? Who is able to authorise claim payments? Will the fronting insurance company take care of it? As treasury or insurance function, there will already be some involvement. Retaining more risk provides a clear incentive for advancing control measures.
  • Cash Management: Which bank is used by the captive insurer, and can it be connected to the cash pool? Different cash pool structures may have different capital implication.
    For example, a Protected Cell Company may need to use a bank account outside of the home jurisdiction.
  • Investment: Can the captive return liquid assets to the parent company?, or do local regulations require some investments to be held in certain (liquid) categories like government bonds?
  • Capitalisation: the minimum level depending on the risk underwritten within the EU is EUR 1,2M, but usually the capital required is a multiple of this figure. Key benefit of a Cell Company is the capital efficiency (more on this in Part 3)
  • Reporting: Usually done quarterly to the regulator and depending on internal requirements on a monthly basis

Sub question for the third part: How to align processes operationally, and to highlight relevant action points which will need to be addressed once a go-decision is made.

4. Data and Technology > Generating an optimal Total Cost of Risk

Deciding on whether or not to start an in-house insurer requires a well worked out quantified business case, based upon different scenarios in order to judge the risk appropriately. In order to generate a fair comparison, a total cost overview will need to be made. This compares the total costs, which will be paid externally i.e intercompany flows like premium to the inhouse insurer will thereby be excluded. Sub question of part four is whether the business case makes sense from a financial perspective. Which costs are in scope will be determined by the analysis resulting from the previous 3 steps.  The simplified example business case below describes an imaginative Netherlands based captive insurance company. Although figures are purely indicative, the size of the amounts is representative of a captive business case.

Example Financial Business Case
x 1.000 Continuation – Expected Captive – Expected Captive – Negative
 
Total External Insurance Premium 10.000 7.500 7.500
Total Losses Retained
Below deductibles 1.000 1.000 1.000
Above (sub) limits 0 0 0
Excluded cover 0 0 0
Within in-house insurer 0 750 5.000
Operational costs
Insurance Premium Tax 2.100 2.100 2.100
In-house insurer costs 0 350 350
Insurance function costs 200 250 250
Risk Management costs 15 15 15
Total Costs 13.315 11.965 16.215
Change – 1.350 -2.900
Capital Required – 3.800 3.800

Premium observations

  • Sufficient premium volume is required. In the example, EUR 2,5 M premium reduction is assumed which will then be retained in-house and thereby is not part of the total (external) cost.
  • IPT will also have to be paid on the captive premium (@21% in the Netherlands)

Losses retained observations

  • Flip side of a significant premium reduction is a significant retention in the captive. In the below example at least EUR 5M is assumed, which will be hit in the negative scenario.
  • Usually this is complemented with an annual aggregate limit in order to limit losses in the entity
  • Part of the business case setup entails a careful claims analysis to make appropriate assumptions

Cost observations

  • Operational costs : accounting, actuarial, audit, independent supervisors as well as a cost allocation for the time used from the insurance manager/function
  • This will need to be outlined in different scenarios for decision making

Overall observation

Bottom line, in the expected scenario here a positive result is projected, but when an incident occurs a negative result (compared to traditional insurance) is projected. This is a very common trade-off requiring a deliberate choice.

Summary

Deciding to start captive insurance is a structural decision (and forms a multiyear commitment) requiring a structured approach, it may help to involve external expertise from a broker, insurer, actuaries, or independent consultants as each business case is specific. The overview in this blog however does describe the main steps and considerations to be taken. When this business case is carefully set up, assumptions clearly described and financial projections are well worked out, this then already provides a solid basis for applying for an insurance license. The initial effort will pay-off at the end, so do not rush the decision making process

This is Part 2 of the Alternative Risk Finance Series, Part 3 will be “Cell Companies 101” and Part 4 will be “Risk Trading and Future Alternative Risk Finance”. Together this generates an overview of the current and future landscape of alternative risk financing.

 

 

Mark Roelands

Risk and Compliance Specialist

 

 

How to Find the Right FX Provider

03-09-2020 | treasuryXL | XE |

In this final installment of our blog series on foreign exchange risk management for your business, we address one of the most important steps in developing an effective risk management strategy—> finding your FX provider.

As we close out our blog series on improving your business’s foreign exchange risk management and avoiding costly mistakes, it’s come time for us to answer one last lingering question, the question that’s had a recurring presence throughout our blog series.

How do I find the FX provider that’s right for my business?

It’s a question that’s come up throughout our series of blogs. From avoiding inflexible solutions to taking care of tricky regulatory compliance, nearly every piece of risk management advice has come down to finding the holy grail FX provider, the one that understands your business and its operations and has the expertise and solutions to address your unique risks.

Now, we’re finally going to talk about how to find this perfect provider.

The importance of shopping around in foreign exchange

The biggest mistake you can make in your search for the perfect provider? Not searching at all.

It can be tempting to just stick with your friendly local bank, or go with the first provider you speak with just for the comfort of having a dedicated provider. But you don’t want to do that. Keeping a narrow focus (and not shopping around) can lead to you missing out on:

  • Better exchange rates

  • Better or more varied service opportunities from working with a specialist provider

  • A more targeted, strategic approach to your foreign exchange.

Now that we’ve established that you should be exploring your options, it’s time to start shopping. But where do you start? What kinds of things should you be keeping an eye out for in your search?

What should you look for in your FX provider?

Ultimately, the right FX provider for you will be the one who can help you to streamline your business operations to make international payments while minimizing regulatory delay, human error, and risk exposure. In order to do that, they’ll need to understand your business, understand what you do, and be able to work with you to directly address your risks and other issues without compromising your business in the process.

When meeting with providers, we encourage you to keep an eye out for (and ask about) the following things.

  • Competitive, but realistic solutions. Don’t fall for the hype. If an exchange rate sounds too good to be true, it almost certainly is. Additionally, some providers may encourage you to speculate in the currency markets or tell you that they can help you to second guess rate movements. In reality, it’s impossible to know how the markets will move, and you should be wary of anyone claiming that you will always be on the right side of market motion.

  • A provider that understands your needs. You shouldn’t be the only one asking the questions. Your provider should be doing everything they can to understand your business, what you do, and how you do it. A provider that doesn’t take the time to learn about your business will not be able to offer the quality of service that you’re looking for.

  • Bespoke solutions to fit your needs. Continuing from that last point, a provider that only offers a generic service will only be able to provide generic protection. As we mentioned in our article last week you should look for a provider with solutions that meet all your foreign exchange needs, including helping you to manage future risk more effectively. Don’t settle for anything less.

 

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

 

 

 

The global FX market, do you want to be a part of it?

02-09-2020 | Niki van Zanten

The straightforward answer is ‘No’. Unfortunately, saying ‘No’ does not imply that you don’t play a part in the global casino named: The FX market. It could be a sane procurement, sales or investment decision that brings you a seat at the table. Unless you are a in this market to make commissions or in some rare instances a (successful) prop trader, you will most likely lose more then you gain when willfully playing the game.

The FX market is by far the largest market in the world easily exceeding equity, bonds markets or any other asset class. Estimates in daily turnover are north of 6 Trillion USD. The vast majority of trades have a USD leg and EUR is coming at a good second place making EURUSD the most traded pair. Comparing this to the Global Domestic Product (GDP) of let’s say 140 Trillion USD as a ballpark figure, the FX market monthly turnover exceeds the world’s annual GDP. Taking into account that not all global GDP related transactions in the world have a FX component, this tells us that a large percentage of the FX are not real money flows.

So what are they? For a part these are institutional investors like pension funds. Pension funds can choose to allocate in different currencies, but the more likely explanation is that a large part of the FX transactions are of a more speculative nature. Hedge funds for instance do not have a functional or group currency and therefore can freely take currency decisions when allocating assets.
So in summary, the largest market place in the world is driven by forces which are extremely difficult to predict by any form of scientific research or even looking into economic data like monetary flows. Not to imply that economic indicators and central bank policy don’t have its influence, but in the end, a market is primarily driven by supply and demand and there is vast speculation in buying and selling of currencies.

Switching to the corporate point of view, companies usually don’t want to be a part of the FX market. It’s the same story as you might wish to procure and/or sell in different currencies than your own for a variety of reason. It’s an open door to mention that this can be very beneficial but all cost need to be factored correctly before taking a decision. With Foreign Exchange this can be a difficult task and considering what is mentioned above, the FX market does not actually make things look better.
A basic example of why it’s hard to get a grip on the currency markets is available when looking at CNH (offshore RMB) forward markets in 2015 and 2016. Although there are structural differences between CNH and CNY in both spot and outright forwards, typically the pricing is at comparable levels (for the majority of us, at least the large China interest does not apply this). Yearend brought a liquidity squeeze and the forward markets showed huge spikes in volatility as well as extreme differences between the CNH and CNY yield curves. There are many more stories like this to share and recently even G10 doesn’t seem excluded from Emerging Market (EM) like volatility, particularly when looking at Brexit and the Swiss Franc peg release of January 2015.

So a few basic assumptions can be helpful when participating in the FX market for real money requirements

• Don’t think you can predict or beat the market
• Price in risk
• Risk can go both ways but spreads are by definition a cost
• If you choose to hedge make sure you get your exposure right and hedge to mitigate this exposure (in other words don’t use derivatives which don’t offset the hedged item)
• Be aware there is a difference between advise on a financial product and actually risk mitigation on a more holistic basis
• It’s hard to beat years of market experience, don’t hesitate to reach out to seasoned professionals who will prevent you from making expensive mistakes

Hope this was a good read and for any questions or feedback please share and keep things interactive.

 

Niki van Zanten

FX specialist

 

Webinar Alert: Treasury Management in the COVID19 crisis

| 26-05-2020 | Francois De Witte

On June 15th, our Expert Francois de Witte will present a Webinar in collaboration with Febelfin-Academy, regarding Treasury Management in the COVID19 Crisis. The Webinar is in Dutch

Omschrijving

Ten gevolge van de COVID19 zijn veel ondernemingen geconfronteerd met cash & liquiditeits problemen. Hoe ga je hiermee om? Welke tools heb je ter beschikking om dit te beheren? Hoe benader je de stakeholders incluis de banken voor bijkomende kredieten.

Deze opleiding heeft als doelstelling om inzicht te geven in:

  • de tools voor het cash & liquidity management en hoe ze te gebruiken;
  • hoe creëer je bijkomende financiële ademruimte: beheer van werkkapitaal – uitstel van kosten;
  • hoe benader je de banken voor uitstel van aflossingen en/of bijkomende kredieten;
  • de inschatting van de risico’s en opportuniteiten van deze nieuwe situatie;
  • het opstellen van een concreet actieplan.

Vereiste voorkennis

Advanced level: biedt praktijkgerichte toepassingen op de reeds verworven theoretische kennis van de “basic level” opleidingen (uitdieping).

Voor wie is deze opleiding bestemd?

De opleiding kan gevolgd worden door verschillende doelgroepen:

  • KMO relatiegelastigden van banken;
  • Financiëel verantwoordelijken van KMO’s en non profit organisaties;
  • Corporate Treasurers.

Programma

Inleiding: Belang van cash & liquidity management

Deel 1: Tools voor het beheer van cash & liquidity management van je onderneming:

  • Wat is mijn cash positie vandaag?
  • Cash forecast voor de komende dagen, of zelfs weken?
  • Beheer van werkkapitaal
  • Cash Burn Rate – Cash runway
  • Dagelijkse stuurgroep Cash Positie
  • Beheer van financiële risico’s

Deel 2: Tips voor het verbeteren van je cash positie:  

  • Beheer van de klantenpost
  • Beheer van de voorraden
  • Beheer van je leveranciers
  • Uitstel van bepaalde uitgaven

Deel 3: Onderhandeling van uitstel vervaldagen of nieuwe kredieten bij de banken:

  • Kredietbeoordeling door banken: aandachtspunten
  • Wat is momenteel voorzien door de overheid, Febelfin en de bank community?
  • Hoe benadert je best de banken: tips en tricks voor je kredietdossier

Deel 4: Risico’s en opportuniteiten – Actieplan:

  • Risico’s en opportuniteiten
  • Tips & Tricks
  • Actieplan

Q & A – Coaching

Pracktische Informatie

  • Duurtijd: 2u30
  • Uren: 10u – 12u30
  • Plaats: Inloggen op online platform
  • Kosten: Leden €160 / Niet-leden: €180

Schrijf je hier in voor de training