Managed FX & Bespoke Active/Passive Hedging
Managed FX is an agency treasury service Bastion Currency Management (BCM) provides to help manage a client's foreign exchange operations. The objectives & functions of this service vary depending on client needs, but start with a treasury and risk consultation (available as a standalone service).
From there, our Managed FX service often involves building a framework that directs risk management decisions, efficient execution of risk management strategies, competitive pricing of FX rates & hedging structures through your existing counterparties (or sourcing and vetting new ones), independent fair valuation of financial instruments, professional deal execution in line with treasury FX policy, favourable price seeking activities, regular reporting and bank/broker fee negotiation.
Shockingly, most SMEs don't know the fees their bank/broker is charging for spot/forward/option contracts nor have they ever implemented an independent, transaction cost analysis to review facility terms and pricing agreements for fairness. Our experience has shown us that banks/brokers have no magic formula or logical reasoning for what they charge a client other than basing it on the strength of the relationship and the client's experience and knowledge of FX markets and instruments. The stronger the relationship and the less the knowledge, the more they charge!
That's why an independent third-party is of utmost importance when dealing with banks' and brokers' "relationship-based" fee trading. Even on-line platforms' "guaranteed" rates are prone to "technical glitches," where spreads increase without the client's knowledge or consent (read the fine print). BCM not only takes care of the pricing frustrations, but can also handle the dealing execution, which include implementing any hedging strategies, market timing, managing orders as well as reporting.
There are many benefits to outsourcing your FX related treasury needs to BCM with the significant and immediately realized ones being cost savings through spread reduction, and efficiency and productivity gains as your employees' time and skills are better utilized in their designated roles while you leverage BCM's specialized knowledge, experience and skills in the currency markets to manage this particular and demanding area.
This expertly syncs up with the rational expectancy to earn positive returns while managing downside risk. Quite simply, extremely few, if any, Small Medium Enterprises (SME) have our specialized, professional FX skill-set, and without such, most companies will have a near impossible time of consistently performing at the level and standards we hold ourselves accountable to.
Simply put, Managed FX reduces a number of internal and external costs, increases revenue while mitigating financial risk rather than adding to it, which is more often than not the case with broker/bank pitched "hedging" solutions. Good for them, nearly always bad for you!
Case in point, if you are pondering (in) a structured (especially leveraged) option product, then an urgent conversation with us is critical because unless you are extremely well versed in option theory, like we are, it's a near certainty that your strikes (protection rates) and barriers (trigger rates) will be far from favourable—you are being grossly overcharged due to the asymmetry in pricing ability between you and your FX provider! However, this is definitely the least of your worries when it comes to options! If you are uncertain as to why we say that with such conviction, again, you urgently need to have a conversation with our experts.
We spend 12-16 hours per day, 5.5 days per week (~3,700 - 5,000 hours per year) immersed as active FX market participants, not just looking at FX rates every now and then throughout the day/week as most corporate FX managers do due to their many and varied job constraints. BCM has a very broad and deep pool of knowledge and experience in all aspects of FX treasury tasks.
We look after the pennies, so that your dollars look after themselves; which is the goal of any well designed, comprehensive FX policy with an accompanying, managed hedging program. We pay attention to every detail, no matter how small, to perform at the highest level you would expect of a professional. We work closely together with you, as no one knows your company's needs better than you, to complement and supplement your own areas of expertise as naturally would happen were we your employee, which we consider ourselves to be!
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