The Multinational Finance Function
INFLATION AND FOREIGN-EXCHANGE RISK MANAGEMENT The discussions of global cash management have focused on the flow of money for specific operating objectives. In addition, an important objective of the financial strategy of an MNE is to protect against the risks of investing abroad. The strategies that a firm adopts to protect against risk may...
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KEY ISSUES IN FOREIGN-EXCHANGE RISK MANAGEMENT To protect assets adequately against risks from exchange-rate fluctuations, it is important for management to (1) define and measure exposure, (2) organize and implement a reporting system that monitors exposure and exchange-rate movements, (3) adopt a policy on assigning responsibility for hedging exposure, and (4) formulate a strategy...
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FINANCIAL ASPECTS OF THE INVESTMENT DECISION An MNE considering foreign investment has many financing options available. The parent company must consider the mix of debt and equity that it will use and which capital market around the world will be tapped to supply the funds. There are at least two basic reasons why the...
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LOOKING TO THE FUTURE Two things are going to have a significant influence on the cash-management and hedging strategies of MNEs in the future. Rot is the information and technology explosion, and second is the growth anal sophistication of hedging instruments (financial derivatives such as options and forwards). The information explosion will continue to...
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HEWLETT-PACKARD IN EUROPE: A CASH-MANAGEMENT STRATEGY of its treasury functions there. The Geneva headquarters is a reinvoicing center that buys from supply factories and resells to sales companies. Its European subsidiaries purchase up to 50 percent of their inventories in dollars but bill in local currencies. HP currently sells more than 10,000 products worldwide,...
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