TOM HUDSON: With the U.S. economic outlook calling for slow growth, many companies are looking overseas to fuel future profits. But making a buck in a foreign land does not necessarily translate into a dollar back home. Tonight's "Street Critique" guest is Wolfgang Koester. He's CEO at Fireapps. That's a firm that works with companies to manage their exposure to the ups and downs of the U.S. dollar. Wolfgang, welcome to NIGHTLY BUSINESS REPORT.
WOLFGANG KOESTER, CEO, FIREAPPS: Good to see you again, Tom.
HUDSON: What do you think the currency environment is for a company doing business overseas?
KOESTER: It is volatile and it's quite frankly, in the last five years have been the most volatile and therefore most challenging for these corporations which is a bit of a shame because of lot of corporations, as we've been seeing through the earnings, are doing a pretty good job managing their companies through the economics, yet they're getting impacted significantly by what they don't need to be getting impacted by, foreign exchange.
After spending a week monitoring volcanic activity and flight schedules for a European business trip, I was struck by the parallels between the systems and processes to control air traffic in Europe, and the structures and policies that currently constrain the euro and the economies of the Eurozone. In both cases, conflicts between the need for central control and desire for regional autonomy have limited Europe’s ability to respond
effectively (and selectively) to a sudden cataclysmic event.
Eurocontrol’s post-eruption lockdown on air travel, on the other hand, could give European economies an untimely nudge in the wrong direction, at a time when the Greek economy is on life support. In short, Europe will survive the wrath of Eyjafjallajokull; the economic survival of the PIGS (Portugal,Italy, Greece and Spain), and the euro as a common currency, is not so certain.
May 27, 2010
Businessweek: Google's Latest Launch: Its Own Trading Floor
"That woven-together technology gives Google a trading advantage: It shows the value of the company's holdings all over the world in near-real time. This is harder than it sounds. Jeffery says that most treasuries with dozens of bank relationships in multiple countries can see the values of only 60 percent or 70 percent of their positions at any given time. Google's systems can monitor 98 percent of its holdings in real time, says Callinicos. "One of the toughest parts of [managing cash] is extracting the right data for the right decisions at the push of a button," says Wolfgang J. Koester, CEO of FiREapps, a maker of financial software. Callinicos "has been an industry leader on this.""
Feb 18, 2010
Bloomberg: Dollar’s Gains May Pose Risk to 2010 Profit Targets
Bloomberg.com
U.S. companies starting to recover from the deepest recession in a lifetime face a new headwind as the dollar strengthens, threatening profit predictions for 2010.
The dollar has gained about 10.7 percent against the euro since Dec. 1 as Greece struggles with debt and the rebounding U.S. economy attracts investment. The euro may slump below $1.30 by year-end, according to forecasts at Bank of America Corp., Royal Bank of Scotland Group Plc and Jefferies Group Inc.
Managing Volatility
Accurately predicting currency movements can make the difference between profit and loss for a multinational. Fortunately, help is at hand.
By Gordon Platt
Finance ministers and central bankers have a habit of substituting “volatility” for “levels” when it comes to what they perceive as out-of-line exchange rates. The Group of Seven industrialized nations, for example, warned in Istanbul in October, “Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability.”
Actually, foreign exchange market volatility peaked late last year in the wake of the collapse of Lehman Brothers. The financial crisis temporarily reduced liquidity in the $3.2 trillion a day foreign exchange market, the world’s biggest market. However, FX volatility has been on a steadily declining trend since those dramatic days of last fall, when major currencies had some of their biggest single-day moves ever.
The big currency fluctuations may be behind us, but the FX market has a way of surprising the best of pundits. The currency market is ruled by Murphy’s Law: If something can go wrong, it will go wrong, and at the worst possible time. Just when banks are making a pretty penny by selling volatility options, betting against big moves, something happens. Sudden moves in the market are what the growing ranks of online FX traders live for and what corporate financial officers fear.
“Most companies are unaware of the issues they have with their FX data,” Koester says. “But we have yet to find one without significant issues gathering, analyzing or making effective decisions about their foreign exchange exposures.” Those issues can make the difference between being profitable or not in a given quarter, he says.
FiREapps Customer Google Awarded Alexander Hamilton Gold Award for Technology Excellence
As part of its transformation, Google’s treasury successfully implemented and integrated seven different solutions from vendors like Quantum, SunGard, FXall, FiREapps and Reval. At the same time, it created “connective tissue” between the applications to provide straight-through processing for its cash management and foreign exchange management. By reducing manual processing and operational inefficiencies, treasury can now focus on value-added strategic opportunities. “This wasn’t a technology exercise on our part; it was strategic,” says Callinicos, who joined Google in 2007 after 14 years at Microsoft, including four as treasurer. “Technology doesn’t define your strategy. We looked out at each area of treasury to determine our strategy and then the processes, people and systems to assist it.”
SunGard today announced that it is offering foreign exchange (FX) exposure monitoring as part of its strategy to deliver value-added services to new and existing customers in the corporate commercial ecosystem.
SunGard's AvantGard FX Management is using FiREapps, a provider of on-demand FX exposure management solutions, to help corporations manage their FX risk, reduce costs and increase profits through optimized FX processes.
Movements in foreign currency markets can substantially impact revenue, income and earnings, resulting in economic risk to corporate value. To manage this risk effectively, organizations require up-to-date enterprise-wide views of FX exposure. With SunGard's AvantGard FX Management, customers can leverage a Web-based FX exposure management platform that helps them cut costs and reduce economic risk related to FX exposure. SunGard's AvantGard customers will have the full scope of functionality from FiREapps while maintaining one line of support via their SunGard relationship.
By Wolfgang Koester
At a time when managing risk and cutting costs are at the top every corporate board agenda, the majority of U.S. multinationals have been forced to explain substantial, unanticipated foreign exchange (FX) losses in the third and fourth quarter. While FX gain/loss has not traditionally been managed as a business cost, its impact on quarterly earnings in the second half of 2008 was unmistakable—but not unavoidable.
The combined effects of increased globalization and currency volatility, including some recent dramatic directional moves, have affected company earnings and share prices, and painfully reminded corporate board members and senior executives that foreign exchange is the cost of doing business internationally. The good news: rather than accept these costs, multinational companies can control and manage them by understanding the sources of exposure and managing them with smarter processes.
AFP Risk Newsletter
It’s time for CFOs to look at foreign exchange as a cost of doing business, and cut it down to size
by Wolfgang Koester
At a time when most companies are working hard to cut costs, the CFOs of many multinational organizations have had to explain substantial FX losses. A review of analyst reports and earnings call transcripts for the third quarter of 2008 reveals a striking trend. Here are just a few examples:
- A leading toy manufacturer reported $15.8 million in non-operating expenses related to foreign exchange for Q3 2008, versus $2.4 million in 2007, caused by its “local currency reevaluation of US dollar cash balances held by Latin American subsidiaries.”
- The now-former CFO for a semiconductor manufacturing supplier reported a foreign currency exchange loss of $6.4 million, “attributable to a significant decline in the Korean won and the euro against the U.S. dollar.”
- Shares of a medical device company fell $2.12, or 5.7% in a day as several analysts voiced concern over the impact a stronger dollar and increased competition could have on future financial results.
The combined effects of increased globalization and currency volatility, including some recent dramatic directional moves, have affected company earnings and share prices, and painfully reminded CFOs that foreign exchange losses are a cost of doing business internationally. The good news: These costs are entirely under the control of the CFO’s organization, and can be understood, managed and reduced with smart processes.
AFP Risk Newsletter
by Wolfgang Koester
Stephen Colbert first coined the term “truthiness” in 2005, to describe things that a person claims to know intuitively or “from the gut” without regard to evidence, logic, intellectual examination, or facts. Truthiness to Transparency explores the difficulties that corporations are having cutting through the FX fog to interpret volatilities and respond accordingly.
Stephen Colbert first coined the term “truthiness” in 2005, to describe things that a person claims to know intuitively or “from the gut” without regard to evidence, logic, intellectual examination, or facts. Truthiness to Transparency explores the difficulties that corporations are having cutting through the FX fog to interpret volatilities and respond accordingly.
Read the full article (PDF)
AFP Risk Newsletter
By Wolfgang Koester
As companies begin to feel the effects of what Fed Chairman Bernanke refers to as the “first green shoots” of an economic recovery, the last thing they’ll want is to see new growth stamped out by preventable foreign exchange losses. One conservative estimate of FX losses suffered by Fortune 100 over the last three quarters suggests that over $15 billion could have been saved by managing those risks more effectively. Considering that, on average, these companies only hedged about 6o percent of their FX risk, it’s clear that a lot of money is being left on the table because treasury “hedged their hedges.”
