JP/6/JACK

JP/6/JACK

Minimizing risks of losses from

foreign-exchange rate fluctuation

Jack Villacis
New York

In an era of free global trade, one area of importance for
companies doing business across boarders is the ability to
overcome currencies fluctuations that can have an impact on a
firms' bottom line.

Converting and transferring currencies to finalize a deal and
pay companies across boarders shouldn't be an obstacle do to the
fact that recent advances in technology combined with secured
sophisticated trading software has made the Internet an
alternative way to facilitate and improve global payment services
that can affect treasury workflow in a positive manner.

The advantage in outsourcing foreign exchange issues to a
global payment service provider is their ability to provide
secure and effective full array of global payments and trade
finance solutions that save time and money while minimizing the
expense of a front and back office work intensive labor cost.

These global payment service providers have developed multi-
channel platforms with dedicated point of contact for their
customers with free technical support and advice. One of the most
attracting features of these global payment service providers is
that they have the capabilities and ability of real time
centralized access to transact data across multiple offices and
locations electronically. Adding these key innovations to your
business will allow you to have an edge on your competitors.

Since many companies neglect to take exchange rates into
consideration when transacting business overseas or don't really
know what the actual cost represents to their bottom line, three
basic elements must be examined on a consistent basis: foreign
currency exchange rates, global payment solutions and multi-
currency accounts and risk solutions.

Foreign currency exchange rates: The tasks of converting
domestic currency into a foreign currency or foreign currency
into domestic currency to receive or make payments are familiar
tasks for most companies. Typically these services can be found
in any major financial institution using standard inflexible
models to solve customer needs.

Companies doing business internationally have to realize that
every company with foreign exchange needs has a variety of issues
they need to understand especially after understanding that what
may be right for one business would not necessarily meet the need
of another business.

These on-line non-bank foreign exchange providers can provide
effective ways in the service cycle (Presale, distribution and
after sale) and flexible solutions to fit each situation.

The most typical deal that is booked is a spot deal, which
settles within two-business days. However, nowadays a company can
enter into forwards outright as well as forward open window
contracts.

These transactions should be an option at all times since a
forward outright contract allows the buyer to lock in an exchange
rate for a specified period ensuring a stable exchange rate no
matter the volatility of the exchange rate at a latter date and a
forward open window contract allows the buyer up to the closing
of the window date or a year from the time the deal took place to
purchase the full amount or increment amounts of a specific
currency.

Global payment solutions and multi-currency accounts: The
advantage of these platforms is the capabilities to process
global payments that can be accessible and shared among multiple
locations.

These multi-channel platforms provide the widest choice of
secure ways to make global payments and tracking its progress
within a large or small corporate structure. With these
capabilities firms avoid human errors, save time and money.

The ability to maintain and access multi-currency account is
critical in any business now days; on-line platforms are a very
effective tool when making global payments. The advantage of a
multi-currency account through on-line platforms is that it can
be divided and true split trades settlements among multiple
parties and your financial institution can route payments to a
foreign entity without necessarily executing a deal for that
currency, thus making the process more efficient.

One great benefit in having multi-currency accounts is the
ability to hold money in a foreign currency account for future
disbursement.

Risk solutions: Currency movements are among the least
predictable factors in international business. It is imperative
to have a dedicated individual focus on this issue. Without an
effective currency management strategy, this volatility can
dramatically alter your bottom line.

Companies should consistently consider risk solutions as a
hedging tactic for a specific transaction or as a strategic tool
to control cash flow.

The cost of keeping an efficient department to track these
risks associated with exchanging currencies are very high if your
company is planning to do it in house, however if you out-source
to a global payment service provider the cost of administration
diminishes to a minimum.

Remember integration, security and training is topics that
should be discussed when searching for the right global exchange
provider. In terms of integration, if you were to design, built
and maintain such a system assuming that your present system has
functions that can be integrated, can cost a significant amount.

The benefits of outsourcing to a foreign exchange specialist
are that they offer platforms that can easily transform your
business in a matter of days with a minimal investment. As a
result offering a compressive browser based package that gives
all domestic and global customers easy access to facilitate
global payments with internal treasury back offices. These
platforms are critical if you have multiple locations with needs
to centralize all foreign payments saving processing costs and
effectively expand its services in real time.

Security is the key for online foreign exchange dealings;
every foreign exchange provider should be able to provide an
online Customer Security and Privacy Policy. The benefit in using
these foreign exchange providers is the ability to transact in a
secure banking environment.

Information is being transmitted through secure encrypted
lines; most of them use secure operational centers. In addition,
these providers should also have a Compliance Policy in place in
order to comply with money laundering matters and local, state
and federal taxes authorities.

The writer, President/C.E.O. of New York Capital Enterprises,
LLC. a global payment service providers, can be reached at
jvillacis@nycapitalent.com.