Mark Lisgo, associate in Eversheds’ Abu Dhabi office
I have been in Abu Dhabi for two years. During that time the value of the pound has fallen sharply against the US dollar, to which the value of the UAE dirham is pegged. To combat the risk of fluctuations between the pound and the dirham, I have invested in a US dollar savings plan.
Having lived in the UK previously, it is still difficult to avoid mentally converting dirhams back into pounds, for example in shops and restaurants. By that token, the weak pound falsely makes a dirham salary seem more than it was in 2008. However, living costs here have not reduced, so the UAE seems to be an even more expensive place to live.
A key concern involves making sure that there is enough money in my UK bank account to meet UK bills each month, primarily the mortgage on my house there. I have to make sure that the amount I send back each month is going to be more than enough to cover everything, while still budgeting for savings and living expenses here. Missing a repayment or bouncing a cheque in the UAE carries the added concern of criminal consequences.
Helen Paul, partner in the Sydney office of Norton Rose, on secondment in the London office
When the Norton Rose Group merger happened in January this year I was given the exciting opportunity of an international secondment within the Norton Rose Group, which meant moving from the Sydney office to the London office for six months. Like anyone, I had to start thinking about how I would juggle both professional and personal issues with the move and, to be frank, the nuances of international exchange rate movements were probably not the first things on my must-find-out-about-that list.
However, as I started talking to the Norton Rose teams who helped me with the logistics, it became clear that I needed to think about it. Luckily, being part of a large organisation I was able to talk to people, and this really is the key. Find out about your firm’s policy – there probably is one. Find out about how they calculate the living allowances that can be paid to you in the local currency. Think about whether you want to move cash from home or use your credit cards for anything above the living allowance.
A key thing can be getting your own personal bank account set up – preferably before you leave. That way you’re ready to receive the allowance in local currency or move your own funds from home at the best time for exchange rates. In the end, anyone who turns down the opportunity of an international secondment on the basis of the exchange rate worries would be really missing out.
Jonathan Wood, partner in the London office of Weil Gotshal & Manges
Before joining Weil Gotshal, I had given no thought at all to the practical consequences, in financial terms, of joining a firm that remunerates its partners in US dollars. The choice was to either deal with the FX hedging by myself or opt for the firm’s standard arrangement under which a certain per cent of remuneration was paid at the prevailing exchange rate, with the remainder paid at a fixed rate. There were doubtless ways in which the more financially astute could hedge against unhelpful currency fluctuations more scientifically than the firm’s default position, but I was almost certain that I would get it wrong and, worse still, only have myself to blame, so I plumped for the easy/lazy option. However, either option still left partners exposed to exchange rate risk and without certainty over what they would be paid.
A while later the firm agreed to fix the exchange rate that applies to all European partners’ compensation. The biggest challenge was, of course, agreeing what the exchange rate should be! Against this backdrop, partners are more understanding about short-term fluctuations. However, the fixed rate would, I am sure, become an issue again if it was shown to be significantly wrong for a sustained period.
There is clearly no easy answer to exchange rate, but this system at least provides certainty and stability.