In this month's episode, we are fortunate to be joined by Danielle Orcutt and Ed Kim from Corpay. They will be discussing how to minimize currency exchange volatility in global trade. Corpay is a global leader in business payments. Corpay delivers unmatched service and expertise with respect to moving money globally. They provide power to their clients international payments and execute plans to manage currency risk in order to support their growth around the world.
Corpay will look at your full assets exposure, identify potential risks, and create a hedging policy for you. So there's no need for expensive technology. We offer this service free and we provide you customized reports.
We hope you will gain some valuable insight into the world of customs tariffs. With all the supply chain challenges the world is facing, our aim is to maximize your duty drawback dollars and boost your bottom line. We hope you'll subscribe to our podcast to stay current with each new episode in which will unveil numerous ways to improve your international trade profitability. Thanks for listening.
In this month's episode, we are fortunate to be joined by Danielle Orcutt and Ed Kim from Corpay. They will be discussing how to minimize currency exchange volatility in global trade. Corpay is a global leader in business payments. Corpay delivers unmatched service and expertise with respect to moving money globally. They provide power to their clients international payments and execute plans to manage currency risk in order to support their growth around the world.
Corpay will look at your full assets exposure, identify potential risks, and create a hedging policy for you. So there's no need for expensive technology. We offer this service free and we provide you customized reports.
We hope you will gain some valuable insight into the world of customs tariffs. With all the supply chain challenges the world is facing, our aim is to maximize your duty drawback dollars and boost your bottom line. We hope you'll subscribe to our podcast to stay current with each new episode in which will unveil numerous ways to improve your international trade profitability. Thanks for listening.
Good afternoon, everyone, and thank you for joining us today. My name is Jill La Madeleine and I am the vice president at International Tariff Management. At ITM, we were predominantly with importers and exporters and managing duty drawback programs. We host webinars and podcasts that focus on topics that we feel will be of interest to businesses that are involved in international trade. Today, we are fortunate to be joined by Danielle Orcutt and Ed Kim from Corpay. They will be discussing how to minimize currency exchange volatility in global trade. Corpay is a global leader in business payments. Corpay delivers unmatched service and expertise with respect to moving money globally. They provide power to their clients international payments and execute plans to manage currency risk in order to support their growth around the world. Corpay utilizes their proprietary payment, automation, technology and currency risk mitigation solutions and take pride in connecting companies large and small with the global financial markets and businesses all over the world. Presenting on behalf of Corpay today, we have Danielle Orcutt and Ed Kim. Danielle is the national Account manager at Corpay. She has worked in the global payments industry for 14 years, selling foreign exchange and risk management solutions to corporate clients throughout the U.S. and Canada at Corpay. Danielle works with companies in all industries that have a need to make or receive payments internationally. She has an MBA in international business and marketing and has a keen interest in learning how companies expand and conduct business overseas. She enjoys networking and is an active board member of the Global Chamber of Commerce New York chapter and has extensive volunteer experience and is the director of currency Risk Management at Corpay. He has 15 plus years experience in foreign exchange risk management and previously worked for Capital One, CIBC World Markets and Wells Fargo. Ed has a Bachelor of Arts from McGill University and is M.A. from the University of Toronto. As we proceed through the webinar, if you have any questions, we encourage you to type them in the chat pane and we will address them either throughout the process of the presentation or at the end. And without further ado, I'm going to hand over the presentation to Danielle. Thank you Jill, for the introduction. We appreciate coming on this podcast. Thank you, International Tariff Management for having us. We're going to be discussing today how to protect your US or Canadian business during inflation and ensure fair pricing in the FX exchange market. We are from Corpay. Our parent company is Fleetcor. We're a publicly traded company on the New York Stock Exchange. We actually now are the largest non-bank corporate FX provider. How we got there is our mergers and acquisitions. We acquired Rogers FX, Cambridge FX, AFEX, and we just acquired Global Reach Out of the U.K.. We also are, if you look over here COMDATA, we're the largest issuer of MasterCard and we also offer invoice pay. So we clearly are a true automated payment processor. So if you need currency or you need to just process payments to vendors or pay, it is the largest provider out there on the corporate FX space.
Who we are:We do 80 billion and assets per year. We offer an online free platform where you can get rates on over 145 currencies. We send wires to 200 countries and we provide our clients with competitive exchange rates. And how we do that is our relationships. We have relations with over 100 plus banks and trading counterparties in six continents. We provide excellent customer service. You receive. Everyone gets a dedicated trader who actually understands the affects market. And hedging. Hedging is like locking in exchange rates to reduce your risk. And at that, in a trader that's proactive, that will reach out to you if you have currency needs and is watching the market. Our platform gives you live rates on spot. That means I need to buy currency today to send out or maybe I'm receiving currency and forward rates where I'm locking in rates of exchange up to two years or less for currency I show or need to receive. Another option we have over here if you're eligible, is fast track payments. What that is, is we can give you up to 28 days to pay for the wires that we also offer currency holding accounts. There's no cost. We don't pay interest on them. But people, you know, companies love enjoying just buying currency and parking it and using it when they need to or if they need to receive currency. We can receive the currency for you to park it into a holding account and you let us know when you want to convert. Maybe you're watching rates, your trader is watching rates for you and you might want to exchange it a week or a month after we receive the currency, you let us know. Another thing we have over here is Hayes. We have a tool that actually will look at your full assets exposure and identify potential risks and create a hedging policy for you. So there's no need for expensive technology. We offer this service free and we provide you customized reports. We do hope to see those notes from you when we do this sort of reporting. We don't expect you obviously, to give all your business to us, but potentially a piece and maybe you're working with your bank also. The last thing I want to talk about is AP automation. We can help you save time with processing wires. We integrate with your ERP system to process wires. So you have a file, you go online, you process the wires, you can check rates on our system and upload files, wire saving you time. With that in mind, what I'd like to do is introduce you to Ed Kim. He's the director of Currency Risk Management Solutions and he will be taking over the presentation now. Okay. Thanks, Daniel. Hello, everyone. Thanks for taking the time. So I thought I would just start at a kind of a higher level. It may be redundant for some, but just want to keep it high level and just go over it. The basics, if you will, of of what you know, why companies may or may not be worried about their foreign exchange and how just just how it all works. You know, first firstly, as we all know, the global, you know, the US economy, the North American economy over the last decade or so has become dramatically more globalized. In other words, depending on the surveys that you read, some suggest that 75% plus of all U.S. businesses and frankly, 90% plus of all Canadian businesses are either buying supplies from overseas and or they have sales from overseas. That is your foreign exchange exposure. So in other words, before before a U.S. or Canadian business can buy supplies from Europe, for example, they first need to purchase the euro currency and that that transaction that must occur creates inherent risk for clients that know today that they will be buying this foreign currency at any point in the future. Conversely, for, you know, for North American clients that are selling overseas, when you sell something in the UK for your product or service, you are going to receive pounds. If you if you are in a position where you need to convert those pounds back into U.S. dollars or repatriate your repatriate back into your functional or local currency, that conversion from pounds to U.S. dollars is the same risk. In other words, the most important, I think, consideration I hate to jump jump on jump slides on you, but what the important I think the most important consideration and certainly your first step in understanding your inherent risk of knowing today that you are going to be buying foreign exchange in the future and or selling foreign exchange in the future is the annual volatility. In other words, this is in the euro, euro to the dollar. This graph, you know, next to the US dollar, probably the most highly traded currency or the most. In other words, the most liquid currency out there, very regulated, as we all know, very democratized. Just a healthy floating currency. This major currency, as highlighted by this graph, can and will move 10 to 30% plus every 12 months. So what that means is if you know that you need to buy euros today, over the next 12 months, you can assume today that you'll either be paying 10 to 30% more U.S. dollars if you're purchasing euros for supplies. Conversely, you may end up paying 10 to 30% less U.S. dollars for those same euro. Same rationale. If you have sales overseas, if you are forecasting to receive euros at any point in the next 12 months, you can assume today that you will receive 10 to 30% plus more U.S. dollars, or conversely, you may receive 10 to 30% fewer U.S. dollars for that forecasted euro sale. So this is really, I think, you know, an important consideration if you know today that you will be buying or selling any foreign currency in the future. Now, this annual volatility of 10 to 30% plus a year does apply to all the major currencies. Are the G7 economies. If you are viewing in a country or currency that may be less, you know, maybe smaller or less liquid, if you will, this annual volatility can be significant significantly more. So it's just something that we want all of our clients and partners to just to be aware of this is the inherent risk on your balance sheet. Having said that, I'm sure we've all been aware over the last 12 to 18 months there have been many, many headlines about a very strong dollar, about inflation being at 40 year highs and about the U.S. Central Bank and most of the other major central banks around the world, very aggressively increasing interest rates without getting too granular interest rates or the Fed or the Bank of Canada, the central banks that control interest rates. To use an analogy, is really the dog that wags all the tails, tails being obviously the bond market, the stock market and the currency market, the commodity markets, etc.. So I think if you haven't noticed already, as the Fed was announcing to the market or as essentially as a U.S. central bank was announced to the market that they would aggressively increase interest rates, you saw equities dramatically falling lower and in turn you saw the dollar increase in value, a rally significantly as well. They're all they're all correlated or interconnected. And that and this is all in an effort to fight the 40 year inflation. The only cure, if you will, for rampant inflation or to slow down an overheated economy is higher interest rates, higher interest rates, slow down lending. So loans become more expensive. So corporate, the corporate world borrows less. Therefore, the corporate world can invest less in new products capital expenditure, new employees, pay raises, etc. At the consumer level, as we all know, with higher interest rates, we're less inclined to take out loans for new homes. We want new cars or larger priced items. So that also has its long term effect on the economy. And in response to all of that, the equity markets must evaluate or readjust as corporate America or corporate North America now must assume a corresponding fall in sales. So this is this this is the narrative for March of 2022. And as far as you know, as it relates to the currency markets, we saw a dramatically stronger dollar. So on the one hand, if you are buying supplies from overseas, you're euros became significantly cheaper. However, if you had sales overseas, your US dollar or Canadian dollar repatriation after conversion was dramatically less as well. So this just highlights the volatility that can be had in not only the currency market but all markets. And from a from an from a margin perspective, for some clients, a 10 to 30% move against them in the exchange in the currency markets may not be significant for them, but for others it may be very significant for them. So how one handles their forex change rate risk and exposure really is dependent on a case by case basis depending on a company specific. You know, their internals, their pricing models, their budgeted rates, their cash flow cycle, their inventory turnover, etc., etc., etc.. So on the surface, identifying foreign exchange rate, risk forecasting your exposure, you know, is this the beginning? Forecasting exposure, by the way, as a moving target for the best of them. So, you know, it can get rather convoluted rather quickly and that's why we would like to help and or advise you and and help you through it if you need it. So, you know what is hot, You know, So having said what you know, considering what was just said, what should a company do if you know today that you will be buying euros, for example, over the next 12 months? And if you have a comfortable handle on your forecast, let's say €1,000,000 over the next 12 months, and you further assume that over the next 12 months the euro will be 10 to 30% plus higher or 10 to 30% plus lower. If you've come to the conclusion that you are not comfortable with this risk. Sorry. Before I get if I if you come to the conclusion that you are comfortable with this risk, you understand it, you acknowledge it, you realize it. If you are comfortable taking that risk, then you don't need to do anything. You can just buy your euros as you need them over the next 12 months. However, if you've concluded that you are not comfortable with this potential 10 to 30% plus swing or variance higher or lower, then you know, you can absolutely and very easily and effectively lock in the rate today, i.e. you can if €1 costs you a dollar five today. And you know, you need to buy €1,000,000 over the next four months and you want to eliminate that 10 to 30% risk. You can lock in one of five today and that will be locked in and confirmed no questions asked. You will be buying your euros for a dollar five. Each one of the exchange rate goes at one 130 or down to $0.90. That volatility now becomes a moot point. You are fully protected and guaranteed a rate of one or five. The product that is used to do this, it's called the forward contract. Very, very commonly used hedging product out there. And, you know, for obvious reasons, it just eliminates all the risk. It's very flexible. If you lock in for a year for €1,000,000, you can use that million euro any time you want. Up until the 12 months. There's no penalty, there's no breakage fees. It's very it's very simple. You know, an effective, you know, a consideration. Here is the foreign exchange market has evolved to meet the needs of the corporate world, namely, as we all know, forecasting cash flow becomes increasingly difficult the longer out you go. So to solve for this moving target dilemma for, you know, the nature of forecasting all these hedging all these products that lock in rates for you are very flexible and very non punitive in terms of, you know, any added costs or out of pocket expenses very quickly if you want, you know, instead of locking in that specific rate of one or five, clients can also walk in a range, i.e. one or seven down to one. Basically the easiest way to look at it, you can if you if you choose to you if you've decided that you do not want to expose yourself to this kind of 30% volatility, instead of locking that specific rate of 1 to 5, you can lock in a range because more, more often than not, when a client does lock in the rate of one or five one of five, their first question is, is human nature being what it is? What happens if the euro falls lower and it becomes cheaper for me to buy the unfortunate, you know, the answer to that whole contract? HEDGES You know, you will not benefit at all that one of five is an obligation to solve for that. These ranges have evolved where instead of locking that specific rate of 1 to 5, you can lock in a range of one or seven down to one, for example. What that means is should the euro move against you and go higher to 110 115 120 like it can and has over the last four months, you will be fully protected at 107. That's the most you'll pay for your euros, but in return you'll remain in a position to buy your euros down to as low as one. So it's really the best of both worlds, you know. The point being is there are various ways to protect yourself and and it depends really on the client and what their needs are. And that's basically all that we wanted to cover. We wanted to keep it high level. Just give you some, I guess, key considerations and and thoughts as a starting point. If you have if you know today that over the next 12 months you'll be buying or selling foreign currency, here's the risk, ten or 30%. And here's some you know, here here are the considerations on how you may want to handle that risk. And with that, I'm not sure if there are any questions or Jill or if you want to if I can hand it back over to you or... Sure. Thanks, Ed. Wow, what a lot of information. And I can understand based on the presentation, the real value of your expertise. You guys really have a great service to offer international companies in terms of, you know, handling the money and the conversion and and all those components that go along with it. I my understanding is that we have some handouts and some polls that were supposed to have been presented over to the pane on the right hand side. I know one of them included an offer from Corpay in regards to free access to their currency research site. I don't see it popping up. I'm not sure whether it is. There are polls and I think there were some handouts as well that look like they're there for download. So I don't see any questions. I'm not sure if there are any at this time. I know some people get camera shy and would prefer to digest the information and then ask it at another time. So with that being said, I'd like to thank Danielle and Ed for joining us today. I, for one, found your presentation very informative and I hope that our listeners have learned a little about how they can minimize the currency exchange volatility in global trade. With the help of your services, we encourage anyone who has questions that we're not asked and or answered today, or anyone who's looking for more information, either in regards to currency exchange or any other issues related to import or importing and exporting in regards to ITM to reach out either to Corpay or to international tariff management. And I think I see the polls are up and let me check any more questions. No, I don't see any. So with that I thank Danielle and Ed again, I really appreciate your participation today and I thank everyone else for joining us and have a great afternoon. You too. Thank you.