Risk management, US Bank

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Information on Risk Management, presented by US Bank at International Trade Fair held on 12/7/12

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Risk management, US Bank

  1. 1. U.S. Bank Global Transaction Services Presented to SBDC of Illinois Eric Trejo Vice President International DivisionU.S. Bank SinglePoint is a registeredtrademark of U.S. Bancorp.
  2. 2. The International Challenge Operations are global Banks are numerous and widespread Resources are limited Do more with less… • Maintain foreign bank accounts • Actively manage group liquidity • Keep costs low • Manage risk 2
  3. 3. Options Do nothing • Continue to spend time, effort and cost maintaining each account directly using each foreign bank’s proprietary electronic banking platform Move to a “Global Universal Bank” • No such thing as a truly “Global Bank” – meaning a bank that has a service set full enough to meet all customer demands in all countries • More likely, these so called “Global Banks” have a full service set in a few countries, and a more superficial capability in several others Leverage a focused multi-bank solution… U.S. Bank SinglePoint is a registered trademark of U.S. Bancorp. 3
  4. 4. The Multi-Bank Solution Does your bank offer SWIFT to facilitate the exchange of information and instructions with your overseas banks? Does your bank manage the connection to your existing banks, and able to offer referrals for new international banking relationships? Does your bank provide a gateway for international information reporting and a method to execute payments remotely on your overseas accounts? 4
  5. 5. Liquidity Management Manage your company’s international liquidity using a Multi-bank Platform for International Information Reporting and International Request for Transfer • Access timely and detailed balance information providing a “real time” view of your USD and foreign bank balances • Optimize cash balances by maximizing investments and minimizing debt • Actively control the flow of funds between your global accounts from one access point5
  6. 6. Sample Account Structure Foreign Bank 1. GBP Account MT940 MT101 MT101 Payments MT101 MT101 SWIFT Foreign Bank 2 Information Reporting U.S. Bank MT940 MT940 Your CAD AccountOrganization SinglePoint MT101 MT101 MT940Swift Message Type: Foreign Bank 3MT101: International Request for TransferMT940: Previous Day Statement Reporting EUR Account 6
  7. 7. Foreign ExchangeRisk Management
  8. 8. Foreign Exchange Marketplace8
  9. 9. Foreign Exchange Products Defined Spot  Purchase / sale of one currency against another;  For value (delivery) two business days from trade date (1 day for USD/CAD) Forward Outright  Purchase / sale of one currency against another at set rate for future settlement  Rate comprised of market spot rate as well as forward points FX Swap  Agreeing upon two separate FX contracts for two separate value dates  Typically involves spot value date against a future settlement date Non-Deliverable Forward  Synthetic forward contract settled against a deliverable currency; used for currencies that are not freely traded Option  The right but not the obligation to purchase or sell one currency against another for particular tenor, notional, and price 9
  10. 10. Risk Management Process Step 1: Define FX Risk Management Philosophy and Objectives Step 2: Identify and Quantify FX Exposures • Include all relevant parties such as treasury, sales, tax, and accounting. What are our specific risks? Step 3: Develop Risk Management Policy and Strategy • Simply eliminate FX risk or are opportunities to maximize revenues present? • What hedging instruments will be used? Who is authorized to deal? At what limits? • Who will confirm and settle deals? Who will sign confirmations? Step 4: Execute Strategy Step 5: Monitor and Measure Strategy Performance 10
  11. 11. Needs Spectrum - International Services Degree of Globalization: Foreign sales Wholly Limited foreign Significant Foreign Extensive office(s) / retail domestic sales / foreign sales / management foreign outlet / suppliers suppliers offices operations Procurement Trading with… Operating in… Global Banking Services Required: Letters of Credit Automated trade In-country accounts Global liquidity Full array of N/A Foreign Exchange services Coin / currency management global services International Wires FX hedging Local branch access Pooling / netting Local payments / collections Global position mgmtSlide Concept courtesy Treasury Strategies 11
  12. 12. Q&A12

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