Clients (Small/medium/large) importers and exporters, parastatals, state owned enterprises and investors, are not always getting the service, advice, and solutions from main line financial institutions to help them to be competitive. Traditionally banks will tier their pricing, products, and service standard according to the standing and size of the clients. Smaller clients often find themselves at the lower end of the importance scale. Banks are also not readily available to assist clients with complex foreign exchange and global trade transaction due to the scarcity of human resources in this highly complex environment.
In addition to wide margins and costly payments, one of the biggest challenges facing importers and exporters involved in cross border currency payments, is how best to manage and mitigate the impact of volatile currency markets on their business operations, cost competitiveness and profitability.
Traditionally banks are not actively involved in this process from the clients’ perspective as they are mostly geared to perform the trade and the transaction on the day of payment. Hedging solutions are offered by the banks purely as a product, however very little value is added to the client insofar as the development of a suitable foreign exchange management policy and the provision of FX risk management tool is concerned, an imperative in the effective management of currency exposures.
The importance of building and maintaining relationships with experts in their field will always benefit your business or personally. Should it be a financial advisor, insurance broker or a foreign exchange intermediary.
Foreign exchange intermediaries like BeztForex have an important role to play in providing foreign exchange services to clients. Foreign exchange intermediaries specialise in foreign exchange and global trade, so they are able to share and offer their expertise and experience to clients for the benefit of the client.
Unfortunately, clients may experience the opposite when dealing with client facing bank staff that have little or no experience in foreign exchange. This may lead to ineffectiveness and may add to the cost of transacting internationally.
We list below some of the important value-add services offered by intermediaries regarding the effective and successful conclusion of Cross-border transaction, that will lead to clients improving the bottom-line!
Risks of trading internationally
Our combined 150 years of experience regarding all aspects of global trade allows us to provide advice and warn clients regarding any potential risks that they may face. Broadly the risks associated with global trade can be summarized as follows:
Commercial risk of the Buyer in the foreign country (exports) – the buyer’s ability to pay is a crucial part of the exporters credit assessment process and will also determine the appropriate payment method to mitigate any risks.
Sovereign risk of the Buyer’s country (exports) – in addition to the commercial risk of the buyer, it is also very important to understand the financial viability of the buyer’s country and the country’s ability to pay foreign currency. Again, this will determine the most appropriate payment method.
Operational/transactional risk – when dealing internationally various documentation and customs requirements are applicable including complexities regarding the logistical process.
Currency risk – as mentioned, one of the biggest challenges facing importers and exporters involved in cross border currency payments, is how best to manage and mitigate the impact of volatile currency markets on their business operations, cost competitiveness and profitability.
Our team can provide information and guidance on proper due diligence of suppliers/buyers and how to reduce the risk associated with global trade, so clients are able to mitigate and reduce the risk to an acceptable level.
Exchange Control regulations
In many cases clients may not understand or be aware of the exchange control regulations and may inadvertently be contravening the regulations. Clients may be executing online foreign exchange payments without understanding the documentation required e.g., paying for imported goods without providing the correct commercial invoice and customs documentation to the authorized dealer. Certain transactions may need SARB approval, an example of the need for exchange control approval would be payment made or received for software.
We deal with these transactions regularly if not daily and by way of having a close relationship with our clients we can assist in ensuring that clients are adhering to the regulations and resolve any potential non-compliance. We can also assist with more complex financial surveillance transactions involving the investment and disinvestment of Capital and Loan funds.
Where there is a need to apply for SARB approval most financial institutions will charge a fee for the application so having an application that is incorrect or not correctly formulated can lead to time wasted but can also be costly.
It’s essential to have a team that can assist and guide clients to ensure when application are formulated and submitted that they are correct and have the required information to be successful the 1st time.
Our team of exchange control experts help clients with their application to ensure they have a high probability of success and that the application is correct and within the ambit of the regulations. An additional value add for clients of BeztForex is that we don’t charge for these applications when the underlying transactions are facilitated by us.
Pricing and Code of Conduct
Intermediary companies such as BeztForex, are well placed to provide very competitive pricing as they are negotiating rates/fees with their partner banks based on the large volume/value of transaction under their portfolios. Pricing transparency is key for intermediary companies and those that are members of The South African Association of Treasury Advisors (http://saata.org.za/) subscribe to the FX Global Code of Conduct, a code that is organised around six leading principles:
Ethics: Market Participants are expected to behave in an ethical and professional manner to promote the fairness and integrity of the FX Market.
Governance: Market Participants are expected to have a sound and effective governance framework to provide for clear responsibility and comprehensive oversight of their FX Market activity and to promote responsible engagement in the FX Market.
Execution: Market Participants are expected to exercise care when negotiating and executing transactions in order to promote a robust, fair, open, liquid, and appropriately transparent FX Market.
Information Sharing: Market Participants are expected to be clear and accurate in their communications and to protect Confidential Information to promote effective communication that supports a robust, fair, open, liquid, and appropriately transparent FX Market.
Risk Management and Compliance: Market Participants are expected to promote and maintain a robust control and compliance environment to effectively identify, manage, and report on the risks associated with their engagement in the FX Market.
Confirmation and Settlement Processes: Market Participants are expected to put in place robust, efficient, transparent, and risk-mitigating post-trade processes to promote the predictable, smooth, and timely settlement of transactions in the FX Market.
At BeztForex we strongly believe that the only real competitive advantage that we have is to be obsessed with client service! Due to our many years of experience and the fact that BeztForex and our Franchisees operates on an “owner manager” principle our DNA is 100% aligned to providing our clients with exceptional service that will exceed all expectations.
We value the relationships we build with our clients and the role that we will play in making our clients more successful. which we hope will lead to our client’s success.
Our team of extra ordinary individuals has over 150 years of International Banking and global trade experience. We are a diverse and energetic team of professionals, passionate about adding real value by applying the BeztForex values of Speed, Simplicity, Self Confidence & Service.
Author: Warren Tagg - BeztForex Franchise Owner - Eastern Cape