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N.Y. firms compete in dollars, pounds and pesos

By JAMES GASPO - 9/28/2012

Despite economic challenges that persist in many countries around the world, New York continues to be actively engaged in the global economy.
 
According to the latest information from the International Trade Administration, a part of the U.S. Department of Commerce, nearly 27,000 New York companies are exporters. Ninety-four percent of these companies are small and midsize operations with fewer than 500 employees.
 
In 2011, New York exported $84.9 billion worth of merchandise in a number of categories, including manufactured products, chemicals, computers and electronic products, and machinery.
 
As exports continue to play an important role in the ongoing economic recovery, the current environment represents an important opportunity for New York's exporters-particularly exporters dealing with countries whose currencies have been down against the U.S. dollar.
 
Many U.S exporters assume that dealing in U.S. dollars reduces their foreign exchange risk. In fact, risk is an element of any cross-border transaction. For exporters who insist on payment in U.S. dollars, these risks include:
 
 

 
To reduce the potential impact of such risks, all exporters-no matter their size-must have a strategy before any such deal is considered.
 
Ideally, exporters should take control of and "own" the deal by managing all aspects of foreign exchange themselves. This approach allows U.S. exporters to build the FX risk into their pricing to account for the potential of adverse exchange-rate moves and the incremental costs of the exchange process itself.
 
Taking control of the deal can also help exporters control a variety of costs imposed by intermediary players that drive up prices with fees; ensure the timing and finality of payment; and maintain a competitive advantage versus the local competition.
 
U.S. businesses that export as well as import in the same country also can take advantage of an opportunity to self-manage their exposure to currency fluctuations. These companies can create foreign currency accounts to make the most of surplus currency funds without converting each transaction into U.S. dollars.
 
For example, a New York company might fund a bank account in Canadian dollars, use it to fund payables with receivables, and retain the flexibility to repatriate the value back to U.S. dollars or hedge the difference.
 
Any overseas business transaction includes potential risks and rewards. Successfully navigating the international marketplace can mean new or substantially expanded markets for those New York companies that are managing the challenges and opportunities of foreign exchange.
 
James Gaspo is president, RBS Citizens and Citizens Bank, New York.9/28/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.