Explain what should be done for an effective exposure management strategy.

Highlight ways in which exposure management strategy can be made effective.

(i) Determine the types of exposure to be monitored.

(ii) Formulate corporate objectives and give guidance in resolving potential conflicts in
objectives.

(iii) Ensure that these corporate objectives are consistent with maximizing shareholder
value and can be implemented.

(iv) Clearly specify who is responsible for which exposures and detail the criteria by
which each manager is to be judged.

(v) Make explicit any constraints on the use of exposure-management techniques, such as
limitations on entering into forward contracts.

(vi) Identify the channels by which exchange rate considerations are incorporated into
operating decisions that will affect the firm’s exchange risk posture.

(vii) Develop a system for monitoring and evaluating exchange risk management activities.

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maurice.mutuku answered the question on April 25, 2019 at 06:24

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