A practical and accessible guide that demystifies ForEx risk for managers in all areas of business Virtually any organisation active in the global economy is impacted by fluctuations in foreign exchange (FX or ForEx) markets. Managers need to understand this increasingly complex issue and measure their firm’s exposure to risk. Corporate Foreign Exchange Risk Management is an in-depth yet accessible guide on effective ForEx exposure management. Designed for professionals responsible for managing a profit & loss or balance sheet influenced by ForEx fluctuations, it enables risk managers to navigate the interconnected worlds of financial management and economics. This innovative guide integrates academic discussion of the economics of risk management decisions and pragmatic advice for various situations in which performance measures affected by accounting standards are paid considerable attention. Readers are provided with the tools and knowledge required to handle a broad range of issues related to ForEx risk management. Clear, non-technical chapters demystify concepts that often appear complicated and confusing to managers. Written by globally-recognised experts in corporate finance, risk management and international business, this book: Employs a reader-friendly narrative style to explain complex concepts Provides a clear, actionable risk management strategy which can be used in a variety of businesses Places all concepts in relatable, real-world contexts Explains important academic research to practitioners in plain English Includes effective pedagogical tools and explanations, straightforward examples and end-of-chapter summaries which highlight key points Corporate Foreign Exchange Risk Management is a must-read for any manager who deals with corporate exposure to ForEx risk, as well as analysts wishing to better understand the relation between corporate performance and ForEx fluctuations and students of corporate risk management.
Acknowledgements vii About the Authors ix Preface xiii Key Terms and Abbreviations xvii Introduction 1 Chapter 1: Why Manage Foreign Exchange Risk? 15 Chapter 2: Commercial Exposure to FX 29 Chapter 3: Net Income Exposure to FX 49 Chapter 4: Balance Sheet Exposure to FX 65 Chapter 5: FX Derivatives Explained 83 Chapter 6: Hedge Accounting Explained 105 Chapter 7: Centralizing Exposure Management 127 Chapter 8: Integrated Risk Management 141 Chapter 9: Managing FX Risk Exposures 159 Chapter 10: Communicating FXRM 177 Index 199
HÅKAN JANKENSGÅRD is Associate Professor in Corporate Finance at Lund University where he teaches a Master-level course in corporate risk management. He has done extensive academic research on firms' risk management strategies and frameworks for integrated risk management. Previously, Dr Jankensgård was corporate risk manager at Norsk Hydro. ALF ALVINIUSSEN has 42 years of experience in leading positions within Corporate Finance and Treasury at Norsk Hydro ASA. Mr Alviniussen is now an independent consultant and since 2013 a member of Stakeholder Groups of the EU regulatory bodies European Banking Authority (EBA) and European Insurance and Occupational Pension Authority (EIOPA). LARS OXELHEIM is professor of International Business and Finance at the University of Agder, Kristiansand, Norway and affiliated with the Research Institute of Industrial Economics (IFN), Stockholm, Sweden. His research interests include the interplay between the firm and its macroeconomic environment, encompassing economic and financial integration as well as managerial aspects, corporate governance, and risk management. He has published some 45 books and numerous academic articles many of which address macroeconomic influences on corporate performance.
Corporate Foreign Exchange Risk Management is a unique and highly valuable guide for managers of organizations whose performance is impacted by ForEx fluctuations. It integrates two separate yet essential sides of the topic: the academic perspective on the economics of risk management, along with the question of how this activity fits into the financial management systems used by real-world organizations. This book covers both topics in depth, demystifying the management of foreign exchange risk. Readers are thus provided with practical knowledge they can apply to more effectively navigate a wide range of foreign exchange risk management issues. Inside, you'll find a concise and accessible discussion of academic research relevant to foreign exchange risk. The authors explain how you can apply advanced risk management techniques to improve decision-making and create value, making your organization robust to the ebb and flow of financial markets. The result is an essential addition to any financial manager's library.
"Corporate Foreign Exchange Risk Management is a must-read for academics and practitioners teaching or working in the area of managing fx risk and international finance. The authors provide interesting insights on the many ways that fx risk impacts corporations. The book includes many illustrations and each chapter ends with Key Chapter Takeaways that I particularly enjoy reading. I highly recommend this book!" —Betty Simkins, Regents Professor of Finance and Williams Companies Chair in Business, Oklahoma State University; VP of Financial Education, Financial Management Association (FMA); member of Market Risk Advisory Committee of the U.S. Commodity Futures Trading Commission (CFTC) UNDERSTAND HOW FOREIGN EXCHANGE FLUCTUATIONS AFFECT YOUR ORGANIZATION Fluctuations in foreign exchange markets directly impact all organizations that actively participate in the global economic arena. Corporate Foreign Exchange Risk Management provides managers with a guide on how to manage foreign exchange risk that is accessible yet thorough, demystifying what can often be a complex topic. If you manage a balance sheet or profit and loss account affected by ForEx fluctuations, this book is an essential read. Exchange rate fluctuations can greatly affect corporate performance in the short and long terms. To navigate these ups and downs successfully, a manager must leverage knowledge of the economic principles of risk management, yet also have a thorough understanding of how risk management strategies form part of a firm's overall financial management. This guide offers the key tools and insights you need to manage the risk inherent in foreign exchange.
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