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V O L . X X I N O. I X M AY 4 , 2 0 1 5 24 E X P O R T S & I M P O R T S F O C U S Jeff Edel, CEO of Soleras Advanced Coatings in Biddeford, which also operates in Europe and China, doesn't hedge. "We are really focused on cash generation and debt reduction," he says. "We don't really need to have an accurate forecast of results in U.S. dollars 12 months from now as long as we generate sufficient cash for debt repayment." Other considerations George Babeu, president and founder of One Source risk management in Portland, says that while his company typically issues credit insurance and risk mitigation products, for example, for receivables, in the past six months clients have asked about FX protection. "One [Maine] company was doing 20% of its business in Canada, and lost about 20% on their top line," he says of the U.S. dollar's impact. One Source works with what Babeau describes as an external boutique forex organization catering to small- and medium-sized companies. "We're hearing more about forex in the last six months in Maine because of the Canadian dollar alone," Babeu says. "ey're our biggest trading partner." Some of the smaller companies are trying to do business by getting cash in advance or a letter of credit, he says, but that can make the company look financially weak to its trading partner. Companies should also factor tax implications into their FX strategies, says Matthew Litz, tax senior man- ager at BerryDunn in Portland. "e taxation of foreign currency transactions can be complex," he says, noting that FX gains or losses must be considered in the FX strategy, and the earlier, the better. L o r i Va l i g r a , M a i n e b i z s e n i o r w r i t e r, c a n b e r e a c h e d a t lva l i g r a @ m a i n e b i z . b i z a n d @ L Va l i g r a Taming foreign exchange risk By Adrian P. Kendall, attorney, Norman, Hanson & DeTroy LLC F oreign exchange, or FX, is only one risk factor for a company, and should be considered along with profit margins, political and inflationary risks, long-term client relationships and procurement currencies. There is no single best approach to dealing with FX risk, which is why the first step should always be the identification and measurement of FX exposure. Remember, the goal is not to eliminate all risk, but to protect against risks that are unacceptable to your company. Here are some exposures: Pre-Transaction Exposure: From price list/offer tender through receipt of order. Transaction Exposure: From receipt of order through production/perfor- mance of services and shipment/final performance and invoicing. Accounting Exposure: From time of invoicing through receipt of foreign cur- rency and the sale recorded on the books. Tips for managing foreign exchange risk: Whenever possible, quote and require payment in U.S. dollars. Consider political and market volatility. In very volatile markets, barter may be preferable to currency. Account for FX fluctuation in setting margins. Make price lists subject to change and final verification on confirmation of purchase order. Obtain payment up front, secure a deposit, consider escrow options. Include an exchange rate price adjustment clause. Offer discounts to customers hit hard by FX fluctuations. Reduce exposure by making the time between order and delivery/payment as short as possible. Keep a foreign currency account and use it to pay suppliers or other third parties. If paying a foreign vendor in local currency, negotiate for a discount: their price may include a margin to cover FX fluctuations. If you have a foreign subsidiary, consider the timing of repatriation of earnings and issuance of dividends. » C O N T I N U E D F RO M P R E V I O U S PA G E " " WGTECH provides advanced IT solutions that help you grow your business. From networking, to data management, security, and managed suppor t, WGTECH delivers industry-leading solutions tailored for you. Call us today for technology solutions that work for you. Colors Pantone 2747 Pantone 1807 www.wgtech.com 207.856.5300 "We call in WGTECH for high-level IT support issues—they can take care of any issue. WGTECH has become a very good partner for us. They come up with ideas to help us grow." Stacy Shaw MMG Insurance, Presque Isle Colors Pantone 2747 Pantone 1807 Sometimes You Need a Strong Partner www.WGTECH.com 207.856.5300 Networking Security IT Consulting n n n Managed Services Cloud/Virtualization Data Management n n n At WGTECH, we find the right technologies, integrate them with your business, and keep them running. We help you get the most out of your IT budget, and scale for growth. And, yeah, when you need some heavy lifting, we're there for you. Advancing security, life safety, and communications. www.norrisinc.com

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