Internal Control And Recommendations Of Nissan

Exchange rate risk, also called as ‘currency risk’ is the risk arising from currency fluctuations. Volatile exchange rates can reduce cost and productivity advantages gained over years of hard work. Firms exposed to international economy face this risk. When a firm has already committed to a foreign currency denominated transaction, the firm is exposed to a exchange rate risk. The firm will incur a

This paper discusses how companies are managing the foreign exchange risk through the use currency options. For instance, some companies who didn’t not take risk management seriously had resulted in inefficient use of capital, increased liabilities, and reputation risk. Moreover, a lack of certainty can cause confusion as to what a company’s acceptance of risk is, such as a level of acceptance. Without risk management, a company can become overconfident in its methods, which could lead to a financial crisis. The failure to objectively take risks leads to bad results like a company taking inappropriate risks not in the best long-term interests of the firm. Furthermore, poor risk management in finance could amount to

IntroductionThis report is to check the hedging strategy that was used and lead to the huge loss of CITIC Pacific Limited and point out the importance of managing foreign exchange exposure through select appropriate hedging strategies. The huge loss of CITIC Pacific Limited and its cause is discussed in the first part. The importance of hedging and the tools of hedging are respectively reviewed in part two and part three. Finally, suggestions are given out on how to design proper hedging strategies for different enterprises.

Liquidity ratios shows the ability of a company to pay off short term obligated debts and fulfill the requirements of cash for unexpected events [1]. The comparison of the liquidity ratios of several individual companies is meaningful, only if those companies are in a same industry and legal system. In the rest of this part, we are going to discuss more details about working capital and current ratio which are 2 key indicators for displaying the liquidity of companies

Nestlé S.A. is a Swiss company and owns a prestigious position being the world’s leading nutrition, health and wellness group (Nestlé, 2016). According to its annual report (2015), this company is exposed to many risks caused by movements in foreign currency exchange rates, interest rate and market prices. The foreign exchange risk comes from transactions and translations of foreign operations in Swiss Francs (CHF). The interest rate risk faces the borrowings at fixed and variable rates. The market price risk comes from commodity price and equity price. The former risk arises from world commodity market for the supplies of coffee, cocoa beans, sugar and others. The later risk arises from the fluctuations of the prices of investments held. (Nestle annual reports, 2015). Thus, financial derivatives instruments are used by this multinational corporation in order to hedge these risks.

Nissan is a multinational automaker headquartered in Yokohama, Japan. It is the 3rd largest auto manufacturer in Japan. The company was founded on 26th December, 1933, with the merger of the automobile components department of Tabata Casting with a small automobile producer and repair shop factory owned by DAT Motors, a new company was formed with

First of all, the company we chosen is Nissan Motor Co., Ltd which usually shortened to Nissan is a Japanese multinational automobile manufacturer headquartered in Nishi-Ku Yokohama, Japan. Nissan was founded since 26 of December 1933. Nissan currently manufactures vehicles in 20 countries and areas around the world including Japan as well. In addition, Nissan also offers products and services such as automobile products, marine products, and related parts in Japan and also internationally in more than 160 countries and areas worldwide.

Generally speaking, Hampton lists three components of Enterprise Risk: Business Risk, Financial Risk, and Hazard Risk. Business Risks are those that could prevent an organization from establishing and maintaining a sustained competitive advantage. Failure to update products or services, obsolescence cause by progression of technology, a change in consumer preferences, and weakening of the market for a product or service all fall under Business Risk (Hampton, 2009, p. 5). Financial Risk is the possibility funds will be inadequate for continued operations. Inadequate initial capitalization, changes in A/R or A/P, excessive debt relative to assets, high interest rates, and liquidity issues caused by financial structure are all facets of Financial Risk (Hampton, 2009, p. 6). Hazard Risk is the least predictable and the most sever; by definition it produces loss without the possibility of gain. Hazards may include such things as fire damage to facilities, physical injury to employees or customers, or frivolous lawsuits. While most businesses insure for the physical damage, there is no way to recoupe the time lost while production is at a standstill (Hampton, 2009, p. 7).

Being one of the largest automakers in the world, General Motors (GM) undertakes its manufacturing operations in over 30 countries with vehicles being sold in over 200 countries. Through undertaking its international operations it also subjects itself to various types of foreign exchange exposures due to fluctuations in the values of currencies; to manage this problem it has adopted a passive hedging policy and aims to reduce the impact of foreign exchange exposures on the business.

Maruti Suzuki’s proportion of current assets and liquid assets is sufficient enough to meet all its current liabilities. However, the liquidity positions of Tata Motors and Mahindra & Mahindra are not so healthy in comparison to competition.

Due to the huge amount of money they have to spend, the company usually does not provide a bundle of cash from their own pocket to get those kinds of new capital assets. To provide the new capital assets needed, the company has some alternative solutions they can choose. Those

5. The organization of the thesis The thesis would be divided into three chapters which consist of: CHAPTER 1: LITERATURE REVIEW This chapter explains theories behind the analysis done in this thesis, the overview of the foreign exchange market, and the derivatives market in Vietnam. CHAPTER 2: RISK ANALYSIS OF TRANSACTION EXPOSURE This chapter gives a brief overview regarding the company, detailed analysis of the transaction exposure in the last five years as well as the current hedging tool of the company. CHAPTER 3 DESIGNING HEDGING STRATEGY This chapter includes some available hedging tools, and long-term hedging strategy for the company and recommendations for the State Bank of Vietnam to manage the derivatives market.

Risk Management involving the commodities market has always been a concern for several international companies. The best substantial method to cope with currency risk is using currency derivatives. Many countries are interdependent on each other due to Globalization, which has led to increasing exposure to exchange rate volatility. Recent studies have shown that risk cannot be eliminated completely but it can be minimized when companies make decisions, which are backed by the correct risk management policies. We found out in this paper that there is no single best method to manage currency risk, but hedging using options provides us with the most accurate or profitable outcomes.

Liquidity plays a key role in the uplift of a firm. Liquidity is a measure which represents the ability of a firm having

Liquidity reflects the ability of a firm to meet its short-term obligations using assets that are most readily converted to cash. Short-term is usually considered as in 12 months or an operating cycle of a business. Assets that may be converted into cash in a short period of time are referred to liquid assets, which are recognised as current assets in financial statements. They are used to satisfy short-term obligations, or current liabilities. Liquidity is important because of changing business operation. A business must be able to pay its financial obligations when needed. Otherwise, it will go bankrupt.