Write 12 pages with APA style on Marks & Spencer Foreign Exchange Risk Exposure. The strategies and policies for administering both foreign currency and exchange rate exposure risks are being deliberated in this research essay.
Treasury department was launched in M&S solely with the aim of capitalizing the company’s vast exposures in employing financial products to manage and administer interest rates, foreign exchange, cash flow and commodity-price risks. M&S had proven solid expertise in these provinces but visualize further vistas in a more methodical approach to the management of structural, long-run exposures. (Smithson 1998:519).
M&S is imparting continuous training to its treasury department employees for the necessary comprehension of various financial products and how it can be used for risk mitigation. Further, M&S is also employing extensive in-house research on its financial risks and also employ external expertise for such research whenever deem it necessary. (Smithson 1998:519).
Exchanger rate risks originate from the volatility in the comparative values of foreign currencies against each other currencies when they are sold and bought on international financial markets. In fact, each transaction in every international business is impacted by the exchange rate risk. For example, if M&S sells goods to a company in the USA. In an import/export transaction, one of the parties will be dealing in the currency of the other.
The party who deals in the other party’s currency will bear the exchange rate risk. If the contract demands for the payment in UK pounds, upon the dispatch of goods, which is to happen in sixty days, the US importer bears the risk between the intervening period. If a US firm does not have a source of income in UK Pounds (), it must purchase pounds from a US bank at the current prices at the time when it makes payment to M&S.
If the value of UK Sterling declines vis- -vis US dollars during the same period, the more will be required to buy the .same number of US dollars to pay the UK firm. .
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