| Summary: | As a result of business globalization, many multinational enterprises operating in different nations need to deal with foreign exchange exposure. Foreign exchange exposure comprises transaction, translation and economic exposures. Moreover, exposure to the foreign exchange movement alters a company’s corporate revenue, profit and future cash flow.
While many firms focus on transaction exposure, relatively few address economic exposure, altered market shares, sales and competitor actions. Thus, in this dissertation, the objective is to explore a firm’s strategy for managing the risk of foreign exchange movement in order to mitigate currency risk and protect corporate profit and value. The strategies explored include foreign exchange exposure hedging with financial derivatives, which is mostly done by firms. Further, the manner in which firms adopt operational and marketing strategies to deal with economic exposure, including operational diversification, operational cost reduction, internal operations and marketing choices, has been discussed.
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