Business Leaders Look To Hedge Liabilities

Tue, Nov 20th 2012, 09:45 AM

Some of the country's top businessmen say between exorbitant operational costs and the volatility of the market, it is becoming increasingly difficult to operate in the private sector. Dionisio D'Aguilar, president of Superwash, and Fred Albury, president and owner of Executive Motors, participated in CIBC FirstCaribbean International Bank's Hedging Seminar hosted by the bank's Regional Client Group yesterday at the British Colonial Hilton. The Client Solutions Group was created to help clients identify hedgeable risks in their businesses, be it foreign exchange, interest rate or commodity risks.

Superwash's chief told Guardian Business that he was interested in how to remove the volatility of energy costs, as it consistently serves as his largest liability. As it stands, D'Aguilar said his business is held "hostage to the market" - and that's not a smart way to do business. "I use a lot of propane and electricity so it would be good to learn to even out your costs. So that even if you get it wrong a little bit, at least it's a constant cost over the next one to two years. The point of coming today was to learn about the process and see if hedging is something that Superwash can use to defray energy costs. There are really no mechanisms in place.

You are held hostage to the market so when there's a strike in Israel or the Middle East, Saudi Arabia or something like that, we feel it in the market. Every consumer pays for it," he explained. "All that we can do is go with the flow and it's really not a wise and sensible way to do business. We are looking to add some sophistication to our day-to-day cost management to level out those costs and make pricing something that we can maintain at a constant level." While D'Aguilar believes local businesses could benefit from having hedging strategies, he pointed that most businesses are intimidated by its sophistication or fear that The Bahamas' market might be too small to fully utilize these services.

However, for Fred Albury, president and owner of Executive Motors, hedging strategies are useful to his business, as he is the official BMW distributor, which means he has to conduct business transactions in euros. He admits that his company is already using some hedging practices, but is now looking to expand its options. "For us with our BMW brand, we are buying in euros. Today's session helped us to standard that through hedging strategies, we would be able to secure certain price levels with our buyers and take away the volatility that exists with the fluctuation of the euros.

It was very instrumental and beneficial. We've been doing some of what they explained since we started with the BMW brand by securing certain rates," Albury shared. In June 2011, the bank officially launched the introduction of CIBC First Caribbean's commodity hedging products. According to the bank's managing director for The Bahamas, Marie Rodland-Allen, CIBC FirstCaribbean "has delivered unique hedging solutions to clients in the airline, utility, manufacturing and hospitality sectors of the Caribbean economy". She further noted that similar sessions would be held in Jamaica, Trinidad and Barbados.

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