Friday, April 5, 2013

BMW and Global Financial Risk

In recent years, the value of the U.S. dollar has experienced historical highs followed by a dramatic decline against the currencies of America?s major trading partners, a trend likely to continue. Meanwhile, legion(predicate) U.S. companies befool moved substantial portions of their operations overseas in say to lower cost and improve profitability. With revenues denominated in U.S. dollars and costs denominated in other currencies, any long-term decline of the U.S. dollar poses a significant risk to profits, competitive positions, cash flows, and ultimately share value. In particular, the significant role of China in many corporate supply chains and the potential appreciation of the Chinese currency together pose a high head of risk to U.S. importers. Financial hedging tools are typically wanting(p) or too expensive to address puffy and long-term rally rate shifts. To in force(p)ly manage long-term exchange rate risks, companies should consider ?operational hedging? strategies in adjunct to traditional and widely used monetary hedging models. usable hedging ? a strategy designed to manage risks with operational means ? provides companies with flexibility in their supply chains, financial positions, distribution patterns and market-facing activities by allowing dynamic adjustments in the locations used to manufacture, source, and sell.

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When deployed carefully, such(prenominal) flexibility can help to reduce the impact of large and long-term shifts in currency values on costs and revenues. Before a company can construct effective operational hedging strategies, it must complete a comprehensive assessment of currency exposure across its supply chain. This is where BMW has excelled. Realizing where their virtually profitability areas are, and what product sells in those locations.

BMW is one of the most consider automotive companies in the world. It has come a long agency though, about 60 years ago, its primary market (aero engines) and large(p) equipment were both in ruins. Even when Germany was in...

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