Financial risk management -Case studies with SKF and Elof Hansson

Abstract

The increased volatility of international markets generates increased financial risk to the companies. Exchange rate change is one of the financial risks where the increased volatility is reflected to the greatest extent. Big multinational companies are particularly exposed to exchange rate fluctuation; therefore, special attention should be paid to exchange rate management.

There are a lot of ways that exchange rate risk management analysis might be set. In our thesis, transaction exposure is our chosen method of analysis. Business transactions are what profit seeking companies' activity is based upon, and transaction exposure management is an activity that observes the whole life span of business transaction from `birth' to `death'. Thus, we stress, that such a whole period exposure analysis of the company's most fundamental activity would give the clearest picture of the topic.

In our thesis, we investigate how theoretical transaction exposure management is executed in practice. We analyse the transaction exposure management of two multinational companies from different industrial clusters as a descriptive example. The results of the companies' transaction exposure management are compared. Our investigation has resulted in a set of interesting observations, together with transaction exposure management suggestions for the companies. Some of the observations give rise to more questions than answers, and it might, therefore, be a good starting point for further research in this field.