Question

How do global firms manage the global financial environment and the foreign exchange market?

Answer 1

Global firms are managing the global financial environment and global exchange market as follows-

A. Global firms are entering into a large number of hedging strategies in order to hedge themselves against translations and transactions risk.

B. Global firms are also opening their production facility in foreign countries in order to eliminate the effect of transaction risk.

C. Global firms are entering into a large number of business combination including merger and acquisitions and they are also trying to eliminate upon the transaction risk and convert them into the translation risk.

D. These companies are also entering into the exchange rate markets in order to manage with the currency fluctuations so that they can control the exchange rate fluctuations to a large extent

E. Global companies are are using the tax heaven in order to reduce their overall impact of cost and they can exploit upon the maximisation of rate of return.

F. Global firms are also entering into the derivatives market using forward and future contract in order to eliminate the risk associated with the future movements

G. Global firms are also entering into the risk sharing strategies in order to control with any kind of risk related to fluctuations of value of transactions.