Survey Determines Foreign Exchange Is More Important to Corporations

American Banker, December 5, 1985 | Go to article overview

Survey Determines Foreign Exchange Is More Important to Corporations


BOSTON -- Foreign exchange management is more important to the financial results of corporations today than it was five years ago.

That's one finding of a detailed survey by Shawmut Corp. of the foreign exchange exposure management of 58 publicly owned companies. Just over half of the companies have sales of $1 billion or more. The remainder are smaller but have more than $1 million in sales.

The companies indicate that increased volatility in foreign exchange markets is their main concern. They say that another key factor that enhances the importance of foreign exchange management is the strength of the dollar.

"Dramatic volatility in foreign exchange rates has increased the risk of doing international business," noted Lois R. Scheirer, an assistant vice president with Shawmut's international money center, at a press conference here on Tuesday.

Other less significant elements boosting the importance of foreign exchange are increased international business and devaluations.

Nearly 80% of the companies surveyed either have reviewed or are in the process of reviewing their approach to foreign exchange management because of its increased significance. The most frequently cited direct causes for review are the effects of foreign exchange market conditions and, to a lesser extent, changes in management personnel and in accounting standards.

Shawmut, which claims to have the second largest volume of international business among New England commercial banks, after the Bank of Boston, conducted the survey between Aug. 15 and Oct. 15. Some 71% of the companies surveyed are in New England.

Other findings of the survey include these:

* Companies are broadening their definition of exposure while at the same time formalizing their foreign exchange policies.

Some 62% of the companies have a formal written policy for foreign exchange management, a proportion that increases to 80% in companies with sales over $1 billion. …

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