Foreign Exchange Rate Risk Management in Multinational Enterprise in Business Strategy

INT 620 Final Project Guidelines and Rubric

Overview

The final project for this course is the creation of a Foreign Exchange Rate Risk Management in

Multinational Enterprise in Business Strategy. You will examine how a multinational enterprise (MNE)

uses foreign exchange risk management in its business strategy.

The final project for this course consists of two major components. The first component is a Case Study

Briefing document that focuses on a case study of foreign exchange risk management techniques

currently used in a multinational enterprise (MNE). You will complete a briefing document in Module

Five that focuses on the risk management techniques currently used in the MNE that you have chosen.

Within this document, you will address the background and nature of the company’s business, the

exposure to foreign exchange rate the company faces (i.e., through its accounts payable because it

imports, through its accounts receivable because it exports, or through both accounts), and the tools or

techniques the company currently uses to mitigate those risks (i.e., the company uses foreign debt to

hedge the currency exposure, using derivatives such as currency swaps, futures, forwards, or options,

for only a certain number of months to hedge only a certain percentage of the exposure, etc.).

The second component is a Subsidiary Expansion or an Investment document that focuses on your

research to expand this MNE into a new country. The country could be the country in which the MNE is

currently located. Or, it could be any country that you are interested in expanding into. Within this

document, you will address the capital structure of the new subsidiary and, if the company has debt

financing, from where or which currency you would get the debt financing, and why.

Once the company

breaks even and starts making a profit, how would you manage the profit (i.e., need to invest for

expansion for growth or because of restrictions on blocked funds, repatriate back to the mother

company annually because you are not certain of the country and currency risk, etc.)?

The project is divided into two milestones, which will be submitted at various points throughout the

course to scaffold learning and ensure quality final submissions. These milestones will be submitted in

Modules One and Five. The final submission will be in Module Nine.

In this assignment, you will demonstrate your mastery of the following course outcomes:

Analyze the fundamentals of foreign exchange risk management in mitigating corporate risk

Interpret exchange rate movements when assessing the foreign exchange risk on the

corporation by examining the institutional structure and

mechanisms of foreign exchange markets

Evaluate the financial and strategic impact of foreign exchange risk on the corporation for

shaping future risk management and funding strategies

Analyze how the dynamics of global capital markets shape the foreign exchange market for

determining funding strategies and mitigating corporate risk

Propose appropriate international capital budgeting strategies for managing multinational

corporations’ international monetary relationships

Prompt

Multinational corporations (MNEs) operate globally with several established subsidiaries in foreign

countries. In this project, you will choose an MNE. You will then download the company’s annual report

and analytically research the company to understand its current foreign exchange rate exposure, and

the tools or techniques the company uses to mitigate the risks. Moreover, you will choose a country in

which you will expand your presence and create a new subsidiary. You will need to identify your capital

structure for your new subsidiary, as well as plan for your profit repatriation.

Resources to consider:

Corporate Income Tax Rates Around the World, 2014

KPMG: Corporate Tax Rates Table

Country and Lending Groups

World Trade Organization: Statistics Database

U.S. Free Trade Agreements

How Much Do U.S. Multinational Corporations Pay in Foreign Income Taxes?

Global Financial Development

International Debt Statistics

 

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