Financial Risk Management with Foreign Institutions From a Central and Departmental View Presented by: Bob Stemple, Associate Director Research Revenue Peggy Bartek, Sr. Grants Administrator MGH Center for Global Health

2 Setting Expectations Specific deliverables Scope Communication Cultural Who? What? Where? When?

3 Assessing Collaborators Financial systems Technical expertise Environmental factors (economic, geographical) Past performance, questionnaires

4 Building an Agreement Clear deliverables Contractual language as protection for all parties Managing risk, never eliminating it Engaging local counsel Third parties – NGOs, hospitals, universities

5 Types of Agreements Fixed price – what happens when currency fluctuates? Milestones – what happens when milestones are not met? Custom agreements

6 Managing Risk - Ongoing Fluctuating exchange rates – who takes the hit? COMMUNICATION! – local and foreign Roles and responsibilities – collaborator and foreign PI Training for local administrators Petty cash at foreign sites

7 Worldwide Research Dealing with Exchange Rates

8 Subcontract from a hospital in Spain Contract states to be invoiced and paid in U.S. Dollars DateAwardedEuroBudgetExpensesPayments 4/12/12$100,000N.A.$100,000 5/14/12$50,000 6/16/12$50,000 7/17/12$50,000

9 Subcontract from a hospital in Spain Contract states Budget in Euros DateAwardedEuroBudgetExpensesEquivalent 4/12/12$100, €75,460 5/10/ $50,000€42,735 6/16/ $50,000€32,725 Total$100,000€75,460 Should be€42,735 Short($11,712)€10,000

10 Confused? It only gets worse!

11 Subcontract from a hospital in Spain Contract states to be invoiced in Euros DateAwardedEuroExpenseInvoicedPayments 4/12/12$100,000 5/14/ $50,000€37,730 6/16/ $50,000€32,730 7/17/ €37, €32,730 Totals($17,552)$82,448€70,460

12 Do of any of these pieces make sense?

13 Subcontract from a hospital in Spain Contract states to be invoiced & paid in Euros DateAwardedEuroExpenseInvoicedPayments 4/12/12$100,000 5/14/ $50,000€37,730 6/16/ $50,000€32,730 7/17/12$44, €37,730 8/19/12$34, €32,730 Total$78,435($21,565)€70,460

14 Subcontract to a hospital in Japan Contract states to pay in Japanese Yen DateAwardedMarkBudgetInvoicedPayments 4/12/12$100,000 5/14/12$50,000 6/16/ ¥73,977 Now what?¥23,977

15 The money will fit together with the research, if we work together as a team!

16 You CAN control the research, you CAN’T control the world economy. Be sure to negotiate to get terms in US Dollars