International finance research

Document Type:Research Paper

Subject Area:Finance

Document 1

The tools applied for transaction exposure management may be different from one company to another. This paper, therefore, aims at expounding on the devices and methods implemented by Coca-cola, Anheuser-Busch InBev, and the Carlsberg Company to effectively manage their foreign exchange transaction exposures. The Coca-cola Company Coca-cola company being a multinational Company, most of its operations are conducted in foreign currencies. This, therefore, exposes it to substantial financial transaction exposures that may have a significant impact on its profits if not well managed. Thus, the Company applies derivative tools to mitigate its financial exposure to worse fluctuations in the foreign exchange and interest rates, prices of other commodities and other possible risks in the market. It engages itself with swap agreements of interest rates that carry at constant variable-to-fixed unison within the measures.

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Any received or paid diversity on swap agreements for interest rates are recognized as expense interest's adjustments over the existence of every swap. Anheuser-Busch InBev Company Anheuser-Busch InBev Company is an international Corporation that deals with the manufacturing of bear drinks across the globe. It, therefore, involves itself in international business thus enabling it to use various foreign currencies always. This, therefore, exposes the Company to a financial transaction exposure that may adversely affect its profit rates if not well handled. The foreign exchange rates of the Company have affected from the issues of fluctuations as a result of payables and receivables plus its large notes that are dominated by Euros and loans from inter-corporations thus leading to foreign currency transaction exposure for the company.

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Money marketing hedge is a method for preventing risks from foreign exchange rates by the use of the Forex trade services (money market). Carlsberg Company being a top corporation across the globe, they have opted to apply the money marketing technique to hedge its financial risks effectively. This is because most of the assets and liabilities of the Company are usually dominated in foreign currencies given that the company is a Multinational Company. The shifting of cash from one form to another whenever the company has sealed a business usually exposes the Company into a foreign currency financial risks, and thus the management has to be cautious on how to effectively hedge out the arising risks from its operations. Therefore, we can entail that the system of managing currency exposure that the Coca-cola Company applies is an effective and ideal one.

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From since the Company was established, it has been able to navigate through and always make profits while minimizing risks for losses in its operations. Evaluation of Anheuser-Busch InBev Company’s Currency Exposure Management System The Anheuser-Busch InBev Company manages its currency exposures through a system that ensures it always avoids adverse market opportunities that lead it encountering losses. Given that it has a system that is in liaison to the ICS for the management of risks, a combination of this method with its Second defense line model, it, therefore, at the right position to always determine adverse operations that will allure it into financial exposure and risk its profits (d'Almeida 2016). The Company has ever been able to identify and predict its market opportunities in the international trade and thus knows when and where to effectively produce its products and avoid currency transaction exposures that will render its financial operations to possible risks.

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