The executive was increasingly concerned about the potential financial impact of a significant shift in exchange rates, given the likely prospect that some of the cash might be needed to fund a U.S. expansion in the next 18 months.
The foreign exchange representative came to the meeting armed with more than current market rates. He brought detailed information prepared by the bank's foreign exchange strategist that outlined expected trends in exchange rates for the major currency exposures this executive managed. This data served as the basis for a discussion about various hedging strategies and the accounting implications of these strategies.
The financial executive used this information to make an informed decision about a hedging strategy. He now receives weekly updates on foreign exchange markets and talks frequently with his bank's foreign exchange representative about market developments.
This is one example of a banking relationship that provides value well beyond the traditional parameters of banking services. Many financial executives look to their bankers to provide a particular product or service.
But they often overlook the opportunity to consider the same banker as a resource for a wide range of information about subjects as varied as international markets, developments in debt and capital markets, economic forecasts and foreign exchange and interest rate risk management techniques. Experienced relationship managers can turn to in-house product specialists to provide information on topics of interest to a specific business or industry.
Commercial bankers also can serve as a valuable resource by introducing a wide range of contacts in the market. Bankers meet frequently with financial executives from other companies, as well as attorneys, accountants, investment bankers and other service sector professionals.
Clients who take the initiative and ask their bankers about other professionals may be rewarded with a valuable list of connections to businesspeople who can also provide information and advise accordingly.
Recently, the owner of a Northeast Ohio-based distribution company spoke with his banker about finding a potential buyer for his business. The banker suggested that the business owner contact two local boutique investment banking firms that specialize in sell side engagements, as well as a local attorney with clients interested in acquisition opportunities.
The banker also asked the business owner to consider selling a portion of the company to a newly formed ESOP. The banker introduced the bank's ESOP specialist, who provided detailed information on the benefits of an ESOP sale. The business owner came away from these meetings with information about the value of his business in the market and options for the potential sale of the business.
Executives who ask questions and request help from their bankers will benefit from untapped expertise. Financial executives who are willing to invest the time to learn about a bank's capabilities often are rewarded with information and ideas that can help them operate their businesses more efficiently.
Here are a few tips to consider when working with a bank.
* Look for an experienced banker who will bring financial ideas and solutions to the table. Share your business objectives and strategies with your banker and work together to improve your business.
* Take the time to learn about your bank's capabilities. If your business is large enough to support a relationship with several banks, find banks that have core competencies in the areas most critical to the success of your company.
* Get to know the product specialists at your banks. They often are the gateway to new ideas and information.
* Do not be afraid to ask for information on a variety of issues. Banks often are an untapped resource when it comes to information that can help you manage your business.
* Bankers are trained to identify and manage risk. Discuss with your banker the significant risk factors that affect your business and the tools or actions available to manage these risks.
* Banks may also be a great intermediary to other service providers or businesses experiencing the same challenges and issues facing your company.
Jeff Green is a senior vice president and division head of commercial banking in LaSalle Bank's Pittsburgh office. He is responsible for managing a team of relationship managers and selling LaSalle Bank's suite of credit products. Reach LaSalle Bank Pittsburgh at (412) 255-5460.
Foreign exchange (FX) rates today fluctuate quickly, increasing the risk and the potential for loss for companies from large multinational firms to small importers/exporters.
It is not unusual for major currencies to move 20 percent in any one year. And everything from unemployment rates to rumors that the Federal Reserve will raise interest rates can create volatility, which affects currency rates.
Due to the complexity of currency fluctuations and volatility, many smaller companies have, in the past, conducted cross-border transactions in U.S. dollars, seemingly passing all currency risk onto their suppliers. This tactic, however, limits opportunities and prevents companies from taking advantage of possible exchange rate gains. In addition, many suppliers will "gross-up" prices to help provide an embedded cushion in their FX risk management practices.
Opening your company up to a currency's volatility can work both against and in favor of your bottom line. If your business does 25 percent or more of its business overseas in any one year, taking a loss due to currency fluctuations -- or missing out on a possible gain -- can have a significant impact on your company's income statement.
Business leaders should consider their total exposure when buying or selling in the global marketplace. Hedging is one way to greatly reduce or eliminate the uncertainties attached to foreign currency transactions. Through products such as forward contracts, a company locks in a currency conversion rate for availability at a specified future date, mitigating the chance that profit will disappear or that costs will go up if the foreign currency value moves unexpectedly.
Technology integration and customization
As the market has become more volatile, technology has made foreign exchange products more accessible for businesses that don't have departments dedicated to analyzing foreign markets.
Often, the head of a smaller company does it all, making it difficult for him or her to deal with time-consuming currency issues while keeping a tight rein on the company's day-to-day operations. As such, some companies turn to third parties to help them evaluate and understand their financial objectives and risk tolerance, and create sound long-term strategies that meet both needs.
Technology -- specifically, the Internet -- has made these tools more accessible and easier to integrate and customize based on a business' specific needs. With the expanded availability of these tools, smaller companies can train centralized staff to use Web-based products to mitigate currency fluctuation risk.
Finding an international partner
To effectively hedge risk related to foreign currency transactions, companies need to work with international banks or institutions that have a major presence in the financial sectors of the countries where the business transactions take place.
While any company can say it is international, what does that actually mean? Unless the bank or organization is a market maker -- an organization that trades in foreign currencies and the foreign markets -- it needs a third party to set currency prices.
So do your homework before taking it at face value when U.S. banks say they're international banks. It may turn out that they're really relying on a network of foreign correspondent banks, which may not be efficient or cost-effective.
The bottom line is that it's imperative to tap into true global expertise that can help your company manage foreign currency risk and move forward. JEFFERSON M. GREEN (email@example.com) is senior vice president/division manager of LaSalle Bank's Pennsylvania Lending Division in Pittsburgh. His office is responsible for developing new banking relationships with mid-to large-cap companies throughout the mid-Atlantic region. LaSalle is uniquely positioned to help its customers succeed in the international marketplace. As a subsidiary of ABN AMRO Bank, it offers an advantage that few banks can match, including local support in more than 3,400 locations in more than 60 countries and territories. Reach Green at (412) 255-5460.
The above scenarios could be considered requests for a reasonable accommodation under the Americans with Disabilities Act of 1990 (ADA). The law was enacted to achieve the noble goal of protecting disabled employees from discrimination. It often requires employers to modify or adjust the job duties or work areas of employees who qualify as disabled.
While compliance with the ADA may be a simple matter like the installation of a ramp for mobility-impaired employees or providing special telephones for hearing-impaired employees, often compliance is more complicated.
As an initial matter, determining who is “disabled” is not as obvious as it might seem. A person is “disabled” under the ADA if he or she possesses a physical or mental impairment that substantially limits one or more major life activities. This can include a variety of conditions beyond traditional notions of “disability” like hypertension, diabetes, HIV, carpal tunnel syndrome and depression. Also, alcoholism and drug addictions can, under certain circumstances, constitute a disability under the ADA.
Assuming that an employee is “disabled” under the ADA, a central tenet of the act is the requirement that the employer provide the disabled employee with a “reasonable accommodation” in order to perform his or her job. Once again, there is no bright line rule defining what constitutes a reasonable accommodation. Although the number of possible accommodations is infinite, common accommodations consist of the following:
- Providing special equipment
- Shifting marginal job duties to other employees
- Permitting employees to work from home
- Providing employees with additional leave time
Denying a reasonable accommodation can lead to an EEOC investigation or litigation with costs and potential damages that dwarf the cost of the requested accommodation. These expenses are often not covered by insurance.
Nevertheless, knowledge and prevention can reduce an employer’s risk of violating the ADA. Thus, employers should know the following.
- The ADA only applies to employers with 15 or more employees.
- An accommodation request does not need to reference the ADA and does not even have to be made by the employee. For instance, a physician’s note placing restrictions on the employee’s duties is a common type of request that is later found to be an accommodation request.
- An employer is not required to change an employee’s core job function or lower productivity requirements for employees.
- A reasonable accommodation need not be granted if it would impose an “undue hardship” upon the employer, determined by factors including the cost of the accommodation, the employer’s available resources, and the impact of the accommodation on the business.
- Any medical information gained from an employee regarding his disability is highly confidential, and steps should be taken to protect against disclosure, such as storing this information apart from the general personnel files.
Ultimately, determining whether a disabled employee can be reasonably accommodated should be an interactive process. The employer should seek and the employee should be prepared to provide all information necessary to make a decision as to whether the employee is disabled and whether a reasonable accommodation exists. Through this process the employer may develop alternative accommodations and ultimately select the least expensive option.
JONATHAN GREEN is an associate at Gambrell & Stolz LLP. His practice areas are commercial litigation, business law and employment law. Reach him at (404) 221-6518 or firstname.lastname@example.org.