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The IMM Role of the Manager in Forex

A corporate financial manager will try to analyze all intercompany payments to make sure they are handled as effectively and quickly as possible. He will go through the calculations described earlier in this chapter to determine whether cable or airmail transfers are to be used.

He will have local subsidiaries arrange value compensation with their local banks, and he will institute a series of cash balance and forecast reports to control the overall cash position as well as movements among members of the group. Acceleration of transfers not only increases availability of funds to the company but also enhances the credit control process. Accounts receivable are reduced and payments are more readily identified.

The rational transfer of funds is the initial step in international money management. Companies that grow to a certain size or, are concerned about traditional methods when the Office of Foreign Direct Investment program, exchange controls, high borrowing rates, or credit limitations are affecting their liquidity position and financial arrangements abroad, typically begin their approach to IMM in the foreign transfer and payment acceleration area.

Since the savings involved are: a direct percentage of the aggregate flows, that first step can by itself be rewarding when the amounts are substantial.

The financial manager in charge of IMM, having a staff function, ideally represents an independent element that can best see the interactions, global position, and international problems of the group.

Such money manager when newly appointed would first review the flow of funds within the group and from third parties. He might do so by devising a questionnaire that asks for data on the flow of funds; the bulk of the data required by such a questionnaire would be terms, currencies, methods of transfer, average amounts, and delays experienced.

From the analysis of the answers would evolve not only systems for the accelerated receipts of large amounts via cables and value-compensated transfers but also programs for the interception of small-amount, large-volume export sale proceeds.

Moving from the rationalization of cash movement, the money manager would analyze disbursements within the group, because funds paid out to affiliates but delayed in the banking pipeline are equally unavailable for corporate purposes. For example, sales representatives or officers abroad may operate on imprested drawing accounts, which have to be replenished periodically.

Delay in providing funds to such accounts may interfere with the company's representative or sales functions. Techniques for the efficient payment of funds to affiliated companies, similar to those for collections, should be inaugurated.

Concurrently with the rationalization of cash movement will come to the analysis of and control over group exchange exposure. In fact, the accelerated movement of cash across international lines will itself affect the foreign exchange position of individual group members.