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Essay / Research Paper Abstract
A 6 page paper discussing currency risk and several approaches to managing it, using approaches of Caterpillar, Merck, Honeywell and Dow Chemical as examples. As globalization increases in its influence, currency risk management will as well. Dow’s approach appears to be the most sound in that it places results in local currency and decides from there whether to hedge with derivatives or other tools. In any case, it does not subject affiliate results to currency exchange fluctuations or reduce the value of capital by assessing only after-tax results. Bibliography lists 5 sources.
Page Count:
6 pages (~225 words per page)
File: CC6_KSacctCurrRisk.rtf
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Unformatted sample text from the term paper:
permanent trend toward globalization brings with it the need to equalize business results based on widely varying changes in world currencies. In recent years, the dollar has been strong
relative to other major currencies of the world, and while good for the US economy, a dollar greatly stronger than other major world currencies creates a bevy of problems for
multinational organizations. Because currency values are never static but can be depended on to regularly change in exchange value, organizations must devise measures
that minimize the effects of that currency exchange rate movement. Increasing numbers of organizations are learning this finance lesson when they least expect it and therefore are least prepared
for its consequences. A result of the learning process is that they are creating innovative ways for identifying and managing their currency risk exposure, in turn creating workable alternatives
that organizations had not identified for themselves. Growth of International Financial Markets Several years ago, Britains The Economist reported that in the late
1980s, "about $190 billion passed through the hands of currency traders in New York, London and Tokyo every day. By 1995 daily turnover had reached almost $1.2 trillion" (Capital goes
global, 1997; p. 87). Private capital movement increased at much the same rate. In 1990, about $50 billion in private capital flowing into emerging markets; by 1996 that
amount had increased to $336 billion (Capital goes global, 1997). That trend slowed some after the advent of the Asian currency crisis in 1997, but it slowly recovered to
begin its inexorable growth once again. There were many lessons learned during the early 1980s, when the strength of the dollar increased dramatically
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