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How Can Your Business Address FX Risk?
25-06-2020 | treasuryXL | XE |
Last week, we encouraged businesses like yours to look beyond currency exchange rates when developing your foreign exchange risk management procedures. This week, we want to take that discussion a little further: what else is out there for businesses looking to improve their FX risk management? One common misconception is assuming that FX risk management is more narrow than it is. That is to say, many businesses might think that any FX strategy beyond purchasing the required currencies at the current spot rates would be currency market speculation. The truth is, there is a wide range of foreign exchange tools for businesses to reduce their risk exposures and improve their operations.
What about hedging?
Of all of the FX strategies and tools, hedging may be the most widely misunderstood. It’s a common misconception that currency hedging serves to second-guess how foreign exchange markets could potentially move in the coming days and weeks, but that’s not its. In FX risk management, hedging is a valuable tool to help insure the business against possible unfavorable movements caused by market volatility. It’s one aspect of a comprehensive FX risk management plan, not the entire strategy.
Like any other strategy, the importance of hedging for your business depends on your business and its exposures. Depending on your FX risk exposures, your organization may not need to make hedging a central part of its risk management plans. Your FX risk management strategies shouldn’t be based on a generalized idea of currency risk; they need to fit your organization’s unique risk profile.
What other products are available?
In short, this will depend on the FX provider. When researching FX providers, don’t just ask them about the rates they offer or what kind of advice they can provide on hedging strategies. Take some time to read up on the full suite of products and services they offer, and consider whether they would be valuable for your business both in the day-to-day and in the long-term.
At Xe, a number of products and services are offered to businesses to aid in their international payments as well as their FX risk, available as a standalone or API. Some of our products include:
Don’t go too far—in the coming weeks, we’ll be taking a closer look at our business offerings and the benefits they could bring to your operation.
Source
Get in touch with XE.com
About XE.com
XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.
Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.
Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.
Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.
Visit XE.com
Visit XE partner page
Trade Finance and ICC Incoterms
| 24-06-2020 | Ger van Rosmalen | treasuryXL
Still up to date every day: “yes do not worry sir, the container will arrive within a few weeks, i hope, it is now the rain season and roads are like rivers”. Many logistics managers are not waiting for these kinds of messages and the irritation grows when they wonders what ***** of Sales has had in mind to deliver this customer on a DAP basis.
This blog is in Dutch language.
De frustratie van iedere logistieke of customer service medewerker is als Sales iets verkoopt zonder zich echt bewust te zijn van de gevolgen en implicaties van die afgesloten deal.
Sales wil geen risico nemen als het op betalen aankomt en heeft van de koper in de binnenlanden van een Afrikaans land wel een Letter of Credit (L/C) als zekerheid gevraagd. De koper wilde die zekerheid wel geven maar dan moesten de goederen wel op DAP basis afgeleverd worden. “Geen punt” volgens Sales.
DAP wil zeggen “Delivered at Place” dus de verkoper moet alle kosten en risico’s voor zijn rekening nemen voor aflevering van de goederen op die overeengekomen plaats ergens in de binnenlanden van dat Afrikaanse land! Sales gaat er maar vanuit dat Logistiek het wel regelt maar weet niet wat voor onmogelijke uitdaging dit is als je je realiseert dat in Afrika sommige geasfalteerde wegen zomaar 5 km buiten de stad overgaan in onverharde moeilijk begaanbare wegen! Zo ook in deze casus, de dure machine moet eerst nog afgeleverd worden in de binnenlanden van dat Afrikaanse land want daar vindt het overdrachtsmoment plaats, aflevering van de machine door afgifte van een “Goods receipt” dat later onder het L/C aangeboden moet worden om betaling te verkrijgen onder het L/C!
Het was toch echt slimmer geweest om de machine af te leveren op basis van een andere Incoterm, liever geen E- of F-term, maar bij voorkeur een Incoterm uit de C-Groep, maar welke? Het is belangrijk dat iedereen binnen het bedrijf, Sales, Finance en Logistiek de impact begrijpen van iedere afgesproken Incoterm.
Het bepalen van Incoterms strategie bij inkoop en verkoop is maatwerk; praat er over met een specialist!
Ger van Rosmalen
Trade Finance Specialist
Meet our Experts – Interview Olivier Werlingshoff
23-06-2020 | Olivier Werlingshoff | treasuryXL
Our Expert Olivier Werlingshoff specializes in the following fields:
His focus is to help the business improve their working capital and cash management processes to release trapped cash, to reduce costs and to be “in control”. Get to know him better:
We asked him 9 questions, let’s go!
1. How did your Treasury journey start?
After working at banks as cash management consultant for several years I was asked to set up a treasury department at a corporate. The company was a combination of retail, real estate and development and active in the whole of Europe. Besides the set up of a new department they also wanted to optimize different working capital processes and increase the cash awareness. Coming from banks this was a total different environment. Instead of telling companies how to optimize their working capital, I had to do it myself together with different departments. My sales experience helped me to increase the internal cash awareness and to promote optimization of working capital processes.
2. What do you like about working in Treasury?
Treasury is the oil in organizations where all cash related departments comes together. By optimizing those processes you can get a grip on your cash, decrease risks and release trapped cash.
3. What is your Treasury Expertise?
Operational cash management, liquidity forecast (direct- indirect), risk management, (international) bank account structure, cash pooling, working capital optimization.
4. Do you have examples of risk mitigation, creation of opportunities and/or cost savings?
Yes, a lot of cost savings examples and also release of trapped cash. Decrease bank transfer pricing, introduction of new payment methods to increase the turnover, implementation of cash pools and optimize working capital processes to release trapped cash to mention a few.
5. What has been your best experience in your treasury career until today?
By showing the benefits of treasury to colleagues by increasing the cash awareness. By doing so, new ideas comes out of the organizations itself and are more easy to implement.
6. What has been your biggest challenge in treasury?
The implementation of a new payment system in a complex organization. You have to focus on stakeholder management and get the operational department behind you with support of the board members.
7. What’s the most important lesson that you’ve learned as a treasurer?
Treasury is a supporting function. You have to help other departments and the CFO to achieve their targets.
8. The coronavirus is undoubtedly an unprecedented crisis. In general, can you elaborate on the impact this virus has on treasury from your perspective?
In a lot of sectors the sales dropped due to the Corona lock-down. Companies need to have a clear view on their cash and be able to pay their invoices on time. Forecasting is more than ever very important and key to be able to forecast funding needs on time.
9. What is your best advice for businesses without a Treasurer?
Not all companies need a dedicated treasurer. Controllers need to have more focus on cash related items and risks (liquidity, FX, Interest and audit). Furthermore it will be good for controllers to focus more on forecasts instead of the reporting of past activities.
Olivier Werlingshoff
Owner at WERFIAD | Working Capital | Cash Management |
Does your business need support in Treasury or a Treasury QuickScan?