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Hedging Strategies Unveiled – Successes and Failures in Managing Currency Risks for Multinational Giants

Book Title: Case Chronicles

Editors:  Prof. Dr. Shraddha S. Bhandwalkar, Dr. Deepali S. Ubale and Dr. Shubhada A. Athavale

ISBN:  978-81-980078-8-9

Chapter: 13

DOI: https://doi.org/10.59646/cc13/274

Author: Ms. Prajakta Zirkande

Abstract

Currency hedging is a crucial financial strategy employed by multinational corporations (MNCs) to mitigate the risks associated with foreign exchange rate fluctuations. This study explores the effectiveness of various hedging strategies by analysing successful and unsuccessful cases from prominent corporations. It highlights the use of forward contracts, options, and swaps as common tools in managing currency risk. Successful examples, such as Coca-Cola, illustrate how a well-rounded hedging approach can stabilize financial performance amidst volatile exchange rates. The findings emphasize the importance of a diversified and adaptable hedging strategy, continuous monitoring of market conditions, and balancing the costs and benefits of hedging. Future research should focus on the impact of emerging financial instruments and technologies, sector-specific hedging practices, and the integration of advanced data analytics in risk management. These insights aim to guide MNCs in optimizing their currency risk management practices to better navigate global financial uncertainties.
Keywords: Currency Hedging, Multinational Corporations, Forward Contracts, Options, Swaps, Financial Risk Management

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