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.