Assignment Example | Topics and Well Written Essays - 250 words - 345

Assignment Example tracks financials for the fiscal year that finish December 2003 addressed foreign fill in risk management. The company first understands and measures its exposure to various risks. For example, pass over is exposed to foreign currency risks. The firm utilizes cash flow hedges to prevent and minimize the risks. However, Ford hedges plainly between 25% and 30% of its foreign exchange risks. The firm hedges various currencies including Swedish krone, Mexico pesos, British superlative pounds, Brazilian reals, and Japanese yen (Hyman 32). Ford uses various hedging techniques to minimize the risks. These methods include value-at-risk (VaR) analysis. VaR assists the formation to assess its exposure to variations in foreign currency exchange rates. The VaR model focuses on advantage and losses. Therefore, the technique allows Ford to calculate the size of the deviation between the probable profit and a per year planned profit with a 95% probability.The current curr ency volatility in Venezuela is Fords primary concern. In 2015, the company announced that, it took charge related to its operations in Venezuela that would reduce fourth-quarter last-place profit by about $700 millions (Reuters 1). Venezuelan bolivars value fluctuates due to the illegal market. Reuters reported that illegal traders exchange a dollar for more than 180 bolivars. Such exchange rate is high compared to the countrys three-tiered exchange rate system. Venezuelas currency exchange rate ranges between 6.3 bolivars and 50 bolivars to the dollar (6). Overall, Ford has grown significantly since its establishment. Despite the fact that the company vexs many risks in its operations, the firm adopted unfathomed hedging techniques. Similarly, any company operating either locally or internationally might experience different challenges. However, good management strategies would propel the