Managing strategic exchange rate exposures: evidence from UK firms

Katrina Bradley · Peter Moles

45 citations0/0 files storedManagerial Finance

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Risk Management in Financial Firms International Business and FDI Global Financial Crisis and Policies

Abstract

The effect of exchange rate movements on firm value is important to firms engaged in international transactions. These accounting exposures can be managed using financial instruments. However, the competitive or strategic effects that create economic exposure require firms to adopt a strategic approach. This paper reports on the extent to which large, publicly‐listed UK firms adopt a strategic approach to the management of exchange rate risk. Unlike earlier studies, the results indicate the widespread use of a range of operational hedging techniques. A significant proportion of firms are also found to incorporate currency risk management as a factor in decisions made by their operating departments. However, the study also indicated considerable variation in the application of operational techniques between firms and industry sectors.

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References

1984Exposure to Currency Risk: Definition and Measurement 2003Creating Shareholder Value 1983Multinational Financial Management.1995Wharton Survey of Derivatives Usage by U.S. Non-Financial Firms 1992The Environment and Internal Organization of Multinational Enterprises 1998Firm Strategy and Economic Exposure to Foreign Exchange Rate Movements 1990STRATEGIC RISK MANAGEMENT 1998Economic exposure and integrated risk management

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2012Supply chain risk management – I: Conceptualization, framework and planning process 2006The exchange rate exposure of UK nonfinancial companies: industry level analysis 2013Supply chain risk management – II: A review of operational, financial and integrated approaches 2007The exchange rate exposure of UK non‐financial companies 2007Exchange rate exposure: do size and foreign operations matter?2010Integrated foreign exchange risk management: The role of import in medium-sized manufacturing firms

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