Establish rigorous foreign exchange policies:

Think about the ways your institution utilizes foreign exchange and different needs call for different tools and planning. For instance, it may be helpful for the treasurer's office to consolidate and coordinate the university's FX planning—for both cost and control purposes—rather than allowing departments to arrange their FX transactions independently. Keep in mind the following situations and approaches when utilizing FX:

Ultimately, the movement of currencies can create operational and strategic risk for the treasury team and is something that should be addressed proactively. Your study abroad and faculty research activities may require regular and frequent payments in foreign currency. It may be possible to manage some of the risk in currency fluctuations with proper FX hedging tools, particularly when the requirements are known in advance.
Asset purchases present different challenges. Some purchase requirements are recurring and predictable. Others, particularly for larger pieces of research equipment or real estate, are one-time transactions requiring substantial advance planning and budgeting. Larger foreign cash flows are clearly needed for institutions that operate campuses abroad. To a smaller extent, campus joint ventures with foreign institutions may call for periodic cash payments. The predictability of payments due to foreign operations may not be known.
Finally, endowments will often have a need for FX due to investment purchases and sales. Though less common, gifts to a university may be located abroad and FX services are required once the gifted asset is liquidated and funds transferred back to the U.S.

With such a wide range of purposes, predictability, currencies and contract sizes, it's clear that the consolidation and coordination of FX requirements will serve most institutions well.

Instant Insights /

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