International Financial Management: Exporting to the

Suppose you are running a very small business that exports
all of its products to Europe, and 100% of your revenue comes from Euros. You have
a family to support and a drop in the value of the Euro could be devastating to
your personal financial situation.

1. What methods do you think would be best to manage this
risk under your circumstances?

Consider a large multinational consumer product company with
operations in all major advanced and emerging economies. Now suppose the value
of Indonesian and South African currencies drops dramatically and the value of
the Chinese RMB increases dramatically.

2. What kind of strategic changes in marketing and/or
location of production facilities do you think this company should take given
these new exchange rates?

Suppose you are a financial manager stationed in a foreign
country, and your boss at headquarters in New York asks you to make a
prediction about the future exchange rates in the country you are currently in.
You see that the economy in the country you are in has started to grow more
rapidly with a lot of new foreign investment. You also see that prices are much
lower in this country than they are back in the U.S. For example, you see that
the price of a Big Mac at McDonalds is half of what it costs you at home.

3. Would you tell your boss that you expect the value of the
currency in this country will increase or decrease?

4.The currency of The Netherlands. Is it stable? Does The
Netherlands have fixed or floating exchange rates? Does the exchange rate
fluctuate a lot?

5. The banking system in The Netherlands. How safe is this
system? Any recent banking crisis in The Netherlands?

6. Overall does the financial system in The Netherlands make
it easy or difficult to do business?

7. What kind of steps would you recommend for a company
doing business in The Netherlands to hedge or minimize their financial risks?