Rethinking Old Concepts for A New Age

Corporate FX Revitalized

Bastion Currency Management (BCM) provides bank and broker neutral, Agency Treasury Services (ATS) geared specifically to the challenges SMEs have with managing their day-to-day FX operations. We accomplish this by working with you to handle your company's currency requirements in a highly competent, consultative capacity. This allows you to leverage our expertise, economies of scale, and unconflicted advice to serve only YOUR company's objectives and best interests.

A company’s financial management is an integral part of its business strategy and not a separate set of decisions made without regard to the company’s other strategies (e.g. sales, production, etc). Undoubtedly, risk management concepts are complex and very often unintuitive. They are most certainly not at the forefront of most people's daily jobs. We perfectly get that and our approach is to make sure we take the time, and use simple, non-technical language to walk you through the process to help make sure you understand what the risks are that you’re facing, what you’re doing about them, and what the potential outcomes are. It’s something that requires an ongoing effort. Our services don't stop at explaining, for example, what a hedge strategy is, what products you should use and then that’s it—we’re done! No. We ensure that it’s a continuous dialogue and not an occasional "How ya doing?"

Our experience is that most companies' natural approach to risk management is way after the fact, and this is inherently counterproductive. The decisions have already been made, and then it becomes a scramble to gather exposures and figure out how to hedge them if at all. We believe that the best process is to start further upstream before decisions are actually made, and then we can assess how a number of risk factors impact your exposures. That way, exposure impact can at least be a consideration, and walking into the situation with your eyes open is preferable to being blindsided when things start to go sideways.

We are the first ATS in Canada to offer Agency Foreign Exchange Services exclusively to SMEs, and at realistic, cost-conscious prices. We well understand the FX needs and budget constraints SMEs face, so we meticulously constructed our services to include only the essential ones you could capitalize on, and then designed the pricing accordingly: so remarkably affordable that you can't afford not to!

As well as having no conflicts of interest you need to worry about, we also adhere to the FX Global Code, a set of global principles in the foreign exchange market to promote a fair, open, and appropriately transparent market. You can see our Statement of Commitment by searching Bastion Currency Management HERE. While you're at it, search for your bank, broker, ATS or third-party service provider. Note: Unless you deal directly with the capital markets unit of a bank, the FX code doesn't cover their conduct with you. Convenient.

Do your FX operations resemble the results of our 2019 SME FX Survey1? If so, our Currency Management services could definitely aid & assist your current set up:
  • Do not hedge FX risk at all

  • Non-hedgers: lack of internal resources, complexity, perceived riskiness2

  • Hedgers: protect margins, stable cash flows, focus on core business2

  • Do not measure actual/forecast FX exposures & rates vs benchmarks to evaluate gains/losses, effectiveness of strategy and risk reduction

  • Do not have a formal Treasury/FX Policy3

  • Do not know how a 1% rate move affects their profit margins

  • Do not set FX target/budget rates based on actual FX rates

  • Rely upon their FX provider for advice and hedging solutions

  • No capability to internally verify/value quoted spot, forward or options prices

  • Do not know the sales margin their FX provider charges4

  • Have never performed a Transaction Cost Analysis of their FX provider's fees

1Phone survey conducted by BCM of 160 Canadian SMEs with annual FX needs ranging from USD $240,000 to USD $100,000,000. Aggregate (%) results are rounded to nearest whole number.
2When asked their reason for hedging or not hedging. 100% of respondents in each category mentioned at least one of these reasons.
3The breakdown of respondents who do not have a Treasury/FX policy were unfamiliar with the term (79.22%), scope and breadth of analysis involved was too daunting (5.19%), hired a consultant to draw one up, but never enacted due to complications in implementation and monitoring (6.49%), other (9.1%).
4Of those who responded "Yes" (only 12.5% of the total respondents), 60% commented being told "market rates" (i.e., interbank rates with no markup) and deal with a broker, and 40% responded that they knew the sales markup they were being charged, but had never verified it for actual compliance.

Questions & Answers

Why haven't you heard of Agency Treasury Services (ATS) before?
Agency Treasury Services were originally designed for multinational corporations (MNC) and institutions, whose scope and depth of treasury needs are as large as they are varied, and therein lay the benefit of outsourcing specific, high-skill functions to specialists vs retaining in-house and executing non-expertly. The whole structure of an ATS firm—from client selection to fee structure (base fee ~0.2% of assets managed, mgmt. fee ~0.5%, perf. fee >20%)—make the entire service model untenable for SMEs, especially since this amounts to clients being billed tens of millions of dollars in fees annually!
Sounds expensive! How much is this going to cost?

The better questions is: how much will our services earn you! Our overarching principle is of cost neutrality to avoid being yet another financial burden and the "base scenario" is methodically planned to generate a net positive return to your company by reducing direct FX fees, related SG&A costs, and through increasing margins by extracting value from unrewarded risk. In fact, our whole service model has been deliberately crafted to add a couple percent directly to your operating profit, and that's net of fees AND without adding any additional risk (e.g. FX options, especially leveraged ones, often increase rather than reduce risk despite being pitched as risk management).

There's the upside—a service that pays for itself and more! Is there a downside? Of course. Like any service, there is a fee. However, our multi-pronged analysis and management of your currency exposures virtually ensures our service fee will cover itself, since we precisely structured our model to be, at worst, a net "zero" cost; meaning you still receive all the benefits of having a professionally run treasury—sans stress— with barely having to lift a finger.

What is our motivation in providing high-level, expensive services affordably?

Ever been billed for professional services where their hourly rate is over $500/hr (~4k a day)? We have and likely you have, too. Professional services keep getting more expensive, and hourly rates are completely out of touch with reality. How many companies could benefit from certain services, but won't retain them or make do with the status quo because of the enormous costs? Far too many! We aim to introduce pricing normality by bringing rates back down to the reality most of us live and work in. Yes, we are worth every cent of our very modest fee, but no we don't think any service is worth the hourly rates we constantly see being charged, not even ours! Also, and we know it's cliché, but we love every aspect of our work. We think of ourselves as the Sherlock Holmes' of FX risk management. Sherlock was a master of deciphering mysteries, motives, and forecasting next moves—all in an effort to protect others. We investigate the numbers, putting all the facts we've uncovered into creative strategies designed to anticipate and remove obstacles to improve your margins by harnessing your currency risk and saving your company from the unwanted volatility of FX rates.

Heck, we'd do it for free (well, maybe not, but you catch the drift) if we won the lottery, but the reality is that we don't hang our hopes on fanciful dreams just as you shouldn't do so with hoping your FX risk will go away if ignored. Our other main drive & focus is helping SMEs by providing affordable access to services they could greatly profit from, but is "uneconomical" for large ATS firms to offer. We also want to ensure that other actors in this complex business of FX are dealing with you in good faith and not taking advantage of you through the information asymmetry that we've seen happen far too often over our careers in FX before making a more ethical move into consulting rather than brokering. If you don't have the same level of expertise as your counterparty at your bank/broker, then you are at a grave disadvantage.

Why do we serve SMEs rather than larger corporations as is the norm for ATS firms?

Simple. We are also an SME and know firsthand the constant struggles every SME goes through dealing with larger companies and with certain industries. Small Medium Enterprises (1-499 employees) are the engine of our economy (99.7% of companies are SMEs, we contribute 30% to GDP, employ 90.3% of the private labour force), yet all too often we don't get the service and prices we deserve nor any credit for being the backbone of Canada's economy.

We often get exploited, very notably in professional services, and this is commonly justified by saying SMEs are "uneconomical" to do business with! Well, we think it's high time to retire this well-worn platitude; hence our motivation to focus on helping only other SMEs. Whether you are on the small side of small or on the big size of medium, our mission is to treat you as the biggest of the big because we all deserve to get prices and service levels that acknowledge our huge contribution to Canada, but that we seldom receive.

My FX provider creates FX policies & hedging solutions for free! Why retain your services?

To answer your question with a question: can you see any problems with your FX policy, hedging solutions and currency advice being given by the very same organization(s) that benefits by generating (the higher the better) commissions from your trading?

Firstly, despite our laundry list of objections about how banks treat SMEs, banks are wise enough to avoid at all costs the ethical/legal quagmire of creating FX policies while dealing FX with the same organization due to the massive legal ramifications (glaring conflict of interest being one of many). There is also the minor fact that FX policies are costly undertakings even for basic ones (min. ~10k) and banks just don't do free! On the other hand, a morally & ethically relaxed broker might if there were a good reason to, can you think of one? Even then, the conundrum for a financial services company like a broker is this is called "giving advice" and is illegal for an FX broker to give ANY sort of advice as they are deemed to be dealing at arm's length from the client (i.e. both parties are acting in their own self-interest and under no duress or pressure from the other party). Dealing at arm's length is the only reason FX brokers, for the time being, have managed to skirt being regulated; unlike banks, which are heavily regulated and certainly more trustworthy—in certain respects at least.

If your broker is giving you advice in any way, shape or form, they are showing their scruples (lack thereof) by completely breaking laws designed to ensure clients aren't being taken advantage of and that fact alone should be a huge warning sign as to whom will be benefiting in the relationship. Clearly, their "free" version of an FX policy and accompanying solutions are going to be skewed to their goals, but if that's not enough to make you look the proverbial gift horse in the mouth, their policies are 100% templated with a few minor tweaks in a text editor. The only investigation into your company's actual needs will be to ask you for your total FX exposures, so they know how many forwards and options to sell you.

Nothing is more expensive than something free. - Japanese proverb

The reality is that finding your FX exposures are just scraping the surface of what needs to be taken into account. The simplest FX policy we have ever done took just over a full week, so we can only imagine that a "free" one would have to be extremely light on any actual analysis, and definitely heavy on the solutions (hedge with FX options!). You get what you pay for and you WILL be paying for this even if you don't realize it. We guarantee they will not offer to benchmark their performance to show you the value of their "solutions", unlike our solutions, which are always benchmarked to company specific KPIs!

What's the 30,000 foot view of the overall process?
The first step is signing a mutual non-disclosure agreement as privacy is of the utmost importance. From there, we collect information from your financial statements, sales, budget assumptions, forecasts, etc. Once we have the data required, we begin analyzing and calculating a whole host of metrics to define the impact of currency moves on balance sheet, income statement and cash flow items. We quantitatively define the risk to your company's margins and your risk tolerance and then begin the process of risk mitigation (brokers always jump here: financial instruments) via financial products. We model these under a number of different scenarios and stress tests to find a mix of products that will fit your goals, and constraints. Once this is done and signed off on, we then assist with the implementation and management of your FX policy while sending regular reports (with performance of the program, FX exposures, etc.). We know our job and what needs to be done, so we can liaise with you as much or as little as you want, but we prefer some regular contact to ensure we are always in possession of the most accurate and timely information needed to perform our job to the level you expect.
What if I decide to cancel my relationship with you?
Agency Treasury Firms require contracts of 5-7 years and 6-mths or more for cancellation, but we understand that's a big ask for an SME. The kind of services we offer dictate the long-term, strategic nature of our relationship. We often come in after FX decisions have been made for the current period and only slowly can we implement a new strategy. As such, the results of our strategies can take time to develop, since we usually look at overall needs a year out. For a comprehensive FX risk strategy to bear fruit, these strategies must be allowed time to come to fruition, so we can accurately measure performance and make adjustments when and where necessary.

Accordingly, we ask for a two-year commitment and 3-mth notice of cancellation. However, there are opt-out terms built into every service agreement to recognize that business needs vary and can change rapidly. We strive to be flexible with our requirements to work within yours. We prefer a few months notice to ensure that any transition period is long enough to bring your internal staff up to speed for a seamless realignment should you in-house your FX, but this can be expedited if the case warrants.

Our Mission

Our Risk Based Approach: A Penny Saved Is A Penny Earned

Foreign Exchange is very much the business of every importer and exporter despite many thinking otherwise. If undertaken with a common sense business approach, it can even add to the bottom-line instead of constantly subtracting from it. Our goal is to maximize your returns and minimize any potential loss to your foreign currency exposures by applying these principles in a disciplined and pragmatic process. We rely on facts, not speculation to assess and institute a robust FX management program that offers you full visibility and predictability into your cash flows, yet strives to capture a positive return as well.

Bastion Currency Management Advantages

Why Choose Us

The benefits of retaining professional FX Risk Advisors are as many as they are varied and offer something for every corporation; whether it be the cost conscious CFO, the risk seeking entrepreneur, or the efficiency minded owner.

  • Our services are fee based and our main income is derived from providing strategic advice and services through consultant contracts. We do not receive transaction commission from clients meaning we are 100% unconflcited and free to focus exclusively on your needs to your sole benefit
  • Maximizing efficiencies to reduce your time spent on a small, but very time consuming and vital area of your business
  • Increase competitiveness and identify target areas of risk to be managed through our comprehensive business analysis (transaction cost analysis, sensitivity analysis, etc.)
  • All strategies (spot & hedging) are structured to reduce transactional costs, participate in positive currency movements and protect against loss
  • Access to a range of products and currencies through our unique relationships and the ability to use your current FX provider
  • Geared exposure when looking for an edge
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We Are Different

  • Economies of Scale

    Hiring a dedicated treasury specialist with robust FX experience is an expensive, difficult endeavour and not economical for most SMEs given the cost and the workload would almost never justify a full-time, dedicated FX professional. Yet you can enjoy all the benefits of having your own "on staff" treasury consultant, for a fraction of the cost by engaging an external and independent provider of FX treasury solutions such as BCM. Our experience and connections in the FX market and the bundling of client trades into a "book" of business gives us pricing power meaning that you will gain access to rates, fees and spreads that were otherwise unattainable due to our unique relationships with a number of FX providers and the ability to have them bid for our aggregated "books".

  • Lock Down Your Risk

    Foreign exchange dealing involves an inherent risk as exchange rates can fluctuate many times a second and unless you have access to the interbank market and rates, you are not only exposed to dealing on retail rates, but without an experienced trader to manage your orders every second of the day you further expose yourself to large intraday rate swings that can drastically increase your costs of purchasing and selling your foreign exchange payables and receivables.

  • Trader Expertise

    Each client receives our professional, trading expertise on every order. We actively analyze a multitude of foreign exchange rates, ancillary markets and utilize a number of proprietary trading systems & algorithms in order to efficiently work client orders, hitting the best rates for a given time period. Let us know what you need and when you need it and then leave your orders in our capable hands saving you time, effort and most importantly - money!

Bastion Currency Management leads the industry in third-party foreign exchange services. Our professional FXperts put the "Person" back in Personal; right where it should be!

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