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Essay / Research Paper Abstract
A 5 page paper discussing McDonald's approach to currency risk management for its international operations. McDonald's finances in local currencies, hedges some cash flows and purchases supplies in local currency. Bibliography lists 7 sources.
Page Count:
5 pages (~225 words per page)
File: CC6_KSfinCurRiskMgMcD.rtf
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Unformatted sample text from the term paper:
individual ultimately responsible for international currency risk management for McDonalds is Erick R. Pfaucht, McDonalds Treasury Risk Manager. Mr. Pfaucht reports to Matthew H. Paull, Senior Executive Vice President
and Chief Financial Officer and has been in his present position since 2002. McDonalds is a Fortune 100 company with locations around the world, and management of currency risk
is well more than only a passing matter. It has the ability to significantly affect overall business results. Mr. Pfaucht Mr. Pfauchts
current title at McDonalds is Treasury Risk Manager, but he joined the company as an accountant in 1999. He maintains that an understanding of the accounting requirements of hedging
transactions is crucial. At McDonalds, "If there is any doubt about the accounting or any doubt about the value of the transaction, we step away. If I cannot arrive
at a value for a hedge, that means that I dont understand the hedge. Then, we dont do that trade" (Passy, 2005). There are 30 members of the Treasury
group, whose sole purpose is to locate and execute hedge transactions for McDonalds. The groups purpose is twofold: manage currency risk rather than to speculate in currency movement
and deal in the commodities that the company uses, such as orange juice. Mr. Pfaucht explains that he has to fully understand ten
currencies. McDonalds is "in far more countries than 10 but the major currency risk that I can focus on are those 10" (Passy, 2005). Currency risk management tools
include "swaps, forward, options, and non-deliverable forwards (these are for currencies that need to be settled in dollars because of capital controls or other restrictions)" (Passy, 2005).
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