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Risk Management | Case Studies

Adding risk management to the curriculum

With its variety of study abroad programs and at least 25% of its students choosing to study overseas, University of Oregon frequently make annual payments in GBP and EUR. With budgets and pricing fixed in advance, managing the impact of currency fluctuation on the cost of each program to students was problematic.

University of Oregon:
University of Oregon: Locking in exchange rates in advance using forward contracts

Established in 1876, the University of Oregon (UO) is a tier 1 national public research university, and one of only two schools in the Pacific Northwest selected for membership in the Association of American Universities. UO employs more than 5,500 staff and has over 24,000 students enrolled in more than 300 degree and certificate programs.

A significant part of UO’s curriculum is its Study Abroad program, with at least 25% of its student population choosing to study overseas during their time at UO. The variety of study abroad programs requires UO to make payment in GBP and EUR annually. With budgets and pricing fixed in advance, managing the impact of currency fluctuation on the cost of each program to students was problematic.

Challenge
Unable to set study abroad pricing in advance due to currency fluctuation.

Solution
Locking in exchange rates in advance using forward contracts.

Result
The ability to set program prices with confidence and limit financial risk.


Katy Molloy Brady, Finance Manager for the Office of International Affairs at UO elaborates, “ Previously we relied on the spot market to book international payments for study abroad programs. We were at the mercy of where the exchange rate happened to be when we needed to send a wire. This required us to be very conservative with our budgeted exchange rates. The students had to bear the higher program costs, which put studying abroad out of reach for many of them.”

In 2015 the UO Study Abroad department merged with the American Heritage Association (AHA) to create Global Education Oregon (GEO). AHA had used forward contracts to manage the cost of its international programs, and GEO management expanded its use of forward contacts to include the former UO Study Abroad programs. This allowed GEO to mitigate financial risks posed when setting program prices up to 18 months in advance. For recruitment purposes, it was important to be able to provide a set program price to students.


Studying abroad with forward contracts

While Katy was with AHA, she had been working with Western Union Business Solutions prior to the merger. She chose to expand the usage of forward contracts to the former UO Study Abroad programs.

On a semi-annual basis, the education specialists at Western Union Business Solutions help Katy to identify the exchange rates available for forward contracts in each currency, which she uses to implement the risk management strategy. They are also able to provide advice on market trends and suggest timing for securing contracts. This allows the GEO team to lock in a set exchange rate for each currency for up to 18 months.



Confidence in set pricing

Forward contracts have helped UO minimize its exposure to market fluctuations, so it can set pricing for its programs in advance. This makes it much easier for the University to manage its study abroad programs, and means students can budget more confidently for the cost of their international experience.

“ Western Union Business Solutions is essential to minimizing the financial risk to the University of Oregon, so that we are able to continue offering high-quality and affordable study abroad opportunities to our students,” says Katy. “ I would definitely recommend the use of Forward Contracts to manage currency risk, they have been beneficial to the University of Oregon.”


“I would estimate that forward contracts save us up to $200,000 a year."

Katy Molloy Brady, Finance Manager - Office of International Affairs, University of Oregon


Forward contracts allow the University to set pricing in advance, which means students can budget more effectively.

Disclaimer: This example is for illustrative purposes only. Your results may vary.