<p>Title: Corporate Strategies for Currency Risk Management</p><p>ackground:Currency fluctuations are a global phenomenon, and can affect multinational</p><p>companies directly through their cash flow, financial result and company</p><p>valuation. The exposure to currency risks might however be covered against or</p><p>‘hedged’, as it is called, by different external and internal corporate strategies.</p><p>However, some of these strategies might include a risk themselves as they can</p><p>be expensive and uncertain. It is therefore an interesting question whether if</p><p>these strategies are actually applied in practice, and if so which strategies are</p><p>favored and why.</p><p>Purpose: The purpose of this thesis is to present and explain the different external and</p><p>internal hedging techniques and to see which, or if any, strategies are favored by</p><p>large, medium-sized and small companies and for what reasons.</p><p>Method: Regarding primary data, interviews with a mostly qualitative profile have been</p><p>used to discuss the subject with respondents from six companies, diversified in</p><p>size using the classification from the European Commission. Secondary data has</p><p>been collected through literature from the university library and internet sources.</p><p>Conclusion: Large companies primarily use the strategy of forwards, since they carry high</p><p>elements of risk aversion, predictability and simplicity. For internal strategies,</p><p>large companies prefer netting. Small companies extensively use matching</p><p>because the routine is easy to establish and handle. Medium-sized companies</p><p>can use either one so much depends on the risk-aversion and cash-flow</p><p>management of the company.</p><p>Large companies continuously regard currency risk a big factor, whereas small</p><p>companies have just recently started due to the dollar depreciation. Translation</p><p>exposure should be considered a big risk regardless of the company size, if the</p><p>company is the main one in a corporate group. Finally, the subject of</p><p>currency risk management is very theoretically broad, but its appliance in</p><p>practice is very slim as only a few strategies are actually favored and frequently</p><p>used.</p>
| Identifer | oai:union.ndltd.org:UPSALLA/oai:DiVA.org:mdh-801 |
| Date | January 2008 |
| Creators | Sarkis, Sumbat, Shu, Chang |
| Publisher | Mälardalen University, School of Sustainable Development of Society and Technology, Mälardalen University, School of Sustainable Development of Society and Technology, Akademin för hållbar samhälls- och teknikutveckling |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, text |
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