FOREIGN EXCHANGE RISK MANAGEMENT : A COMPARATIVE STUDY OF FOUR MULTINATIONAL MANUFACTURING FIRMS IN SINGAPORE

Abstract

Managing foreign currencies is not a new issue, however, managing their exposure is a recent phenomenon. The multinationals are increasing their diversifications into foreign countries, and currencies have been fluctuating widely under the present floating exchange rate system. A number of theories have been suggested as how to manage economic exposure of a company. Various techniques are available for managing transaction exposure, and the accounting rules are frequently updated to improve the existing guidelines regarding translation exposure. However, not every technique can be applied to any particular company. This study looks at four multinational manufacturing firms in Singapore. Their definitions of exposure and their styles of exposure management are compared and analyzed in an attempt to formulate general guidelines for effective management of foreign exchange exposure.