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BCR has long been a beacon of innovation and excellence in the realm of receivables finance, playing an instrumental role in shaping the industry’s international landscape. Through its comprehensive conferences, insightful publications, and thought leadership, BCR has facilitated crucial dialogues and connections among industry professionals, driving forward the development of receivables finance globally.
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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.
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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.
For example, a Protected Cell Company may need to use a bank account outside of the home jurisdiction.
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
Premium observations
Losses retained observations
Cost observations
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
The Treasurer’s Toolkit: Unpacking the DNA of a successful treasurer in 2025
8-9-2020 | treasuryXL | Refinitiv |
How did treasurers become the guardians of business risk?
In the aftermath of the financial crisis, corporate treasury teams were thrust into the spotlight when businesses prioritised cashflow as banks’ appetites to lend waned. Since 2008, the role of the corporate treasurer has evolved from that of a diligent back-office function, to increasingly become more of a strategic advisor to the board. Today’s corporate treasurers have a much broader remit and the subsequent onslaught of regulations such as Basel III, Dodd Frank, MiFID II and the International Accounting Standards have ensured that the treasurer now plays a critical role in ensuring the survival, and success, of businesses.
To sustain this advisory relationship with senior stakeholders and further develop as a strategic lead in the global competitive business landscape, corporate treasurers must understand the vital skills and relevant experiences that will not only help propel their careers but differentiate them from others in the market.
In this ground-breaking research report The Treasurer’s Toolkit, Refinitiv has identified key trends in how corporate demands have shaped the skillsets, desired experience and typical profiles of the modern corporate treasurer. Our research incorporated the views of 250 CFOs, heads of finance and recruitment professionals, across five continents in businesses varying in size, from fewer than 100 employees to more than 5,000. In this report we take a deeper dive into the research, to unpack the DNA of the successful treasurer, now and in the future.