A financial executive with a large global manufacturing firm recently met with his bank’s relationship manager and foreign exchange representative to discuss a foreign subsidiary’s large cash position in a foreign currency.
The executive was increasingly concerned about the potential financial impact of a significant shift in exchange rates, given the likely prospect that some of the cash might be needed to fund a U.S. expansion in the next 18 months.
The foreign exchange representative came to the meeting armed with more than current market rates. He brought detailed information prepared by the bank’s foreign exchange strategist that outlined expected trends in exchange rates for the major currency exposures this executive managed. This data served as the basis for a discussion about various hedging strategies and the accounting implications of these strategies.
The financial executive used this information to make an informed decision about a hedging strategy. He now receives weekly updates on foreign exchange markets and talks frequently with his bank’s foreign exchange representative about market developments.
This is one example of a banking relationship that provides value well beyond the traditional parameters of banking services. Many financial executives look to their bankers to provide a particular product or service.
But they often overlook the opportunity to consider the same banker as a resource for a wide range of information about subjects as varied as international markets, developments in debt and capital markets, economic forecasts and foreign exchange and interest rate risk management techniques. Experienced relationship managers can turn to in-house product specialists to provide information on topics of interest to a specific business or industry.
Commercial bankers also can serve as a valuable resource by introducing a wide range of contacts in the market. Bankers meet frequently with financial executives from other companies, as well as attorneys, accountants, investment bankers and other service sector professionals.
Clients who take the initiative and ask their bankers about other professionals may be rewarded with a valuable list of connections to businesspeople who can also provide information and advise accordingly.
Recently, the owner of a Northeast Ohio-based distribution company spoke with his banker about finding a potential buyer for his business. The banker suggested that the business owner contact two local boutique investment banking firms that specialize in sell side engagements, as well as a local attorney with clients interested in acquisition opportunities.
The banker also asked the business owner to consider selling a portion of the company to a newly formed ESOP. The banker introduced the bank’s ESOP specialist, who provided detailed information on the benefits of an ESOP sale. The business owner came away from these meetings with information about the value of his business in the market and options for the potential sale of the business.
Executives who ask questions and request help from their bankers will benefit from untapped expertise. Financial executives who are willing to invest the time to learn about a bank’s capabilities often are rewarded with information and ideas that can help them operate their businesses more efficiently.
Here are a few tips to consider when working with a bank.
* Look for an experienced banker who will bring financial ideas and solutions to the table. Share your business objectives and strategies with your banker and work together to improve your business.
* Take the time to learn about your bank’s capabilities. If your business is large enough to support a relationship with several banks, find banks that have core competencies in the areas most critical to the success of your company.
* Get to know the product specialists at your banks. They often are the gateway to new ideas and information.
* Do not be afraid to ask for information on a variety of issues. Banks often are an untapped resource when it comes to information that can help you manage your business.
* Bankers are trained to identify and manage risk. Discuss with your banker the significant risk factors that affect your business and the tools or actions available to manage these risks.
* Banks may also be a great intermediary to other service providers or businesses experiencing the same challenges and issues facing your company.
Jeff Green is a senior vice president and division head of commercial banking in LaSalle Bank’s Pittsburgh office. He is responsible for managing a team of relationship managers and selling LaSalle Bank’s suite of credit products. Reach LaSalle Bank Pittsburgh at (412) 255-5460.
