Foreign Exchange Risks Research Assignment Paper

Foreign Exchange Risks
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Running a business that primarily operates on export market is not easy. Considering that all my revenues come from the exportation of the products to Europe, I am susceptible to the risks in foreign currency. A fall in the value of Euros, for instance, will affect my business’ finances drastically. Due to these risks, I have enacted ways through which I can protect my personal finances. The ways are discussed below.
The first way to protect me from this risk is through is hedging my bets in an already currency-hedged mutual fund (Constance, 2014). By employing the certain investment practices that are sophisticated for instance options and futures in the hedging of currency risks, hedged mutual funds minimize losses a great deal. By hedging my bets in Euros, I will neither be liable for losses nor will I be for gains, but at least I will be safe (Rachel, 2014).
Productivity increment is another vital method I have put into an account. According to Vikram Mahidhar, in offshore operations, through such programs that improve operations, production will be increased. The result is that it offsets the rising costs. Some of these practices that I can employ are lean production. This increases productivity at low costs of labor, decrease the delivery lead time and improve quality among others.
I can also protect my personal finances in my small business by shorting the overvalued currency (Bryan, 2014). Now that I am operating my business with the U.S dollar but get my revenues in Euros, I can exchange the Euros to US dollars. In the case or the time when Euro will appreciate, I then buy it at a lower exchange rate. My profit will come from the difference between the buying and the selling prices.
Investing in the local procurement and production is another vital method to reduce risks in the currency fluctuation era. I will also look for ways of establishing supply chains in the local markets in the United States. By doing this, I will secure my business the costs of inputs. During fluctuations like for my case, the depreciation of Euros, I will still stabilize my revenues and thus reducing the risk. The devastations of financial situations as a result of fluctuations in the foreign currency can be better dealt with by applying simple strategies explained above.
Fluctuations in exchange rates of foreign currency will affect companies with multi-national business operations. This, therefore, calls for adjustments to avoid losses and keep up with the competitive global market. The adjustments here for many companies involve the employment of what is called operational hedging strategy (Joshua, 2015). In the case of a multinational consumer product company which is operating in various leading economies, fluctuation of exchange rates in these economies will directly affect it. For this matter, the company faces reduced value in currency in South Africa and Indonesia but an increase in the Chinese RMB. The company has to make strategic adjustments to avoid loss now that it is operating in both companies.
Changes in the locations of production and marketing are inevitable for the company to sustain itself in the market. The company should increase its ...