Forex risk management for multinationals: internal and external hedging techniques

Effective developed technique of hedging are providing the chance to mitigate risk, to concentrate on main business activities and to be in win-situation. Purpose of research is a study of the various internal and external techniques of risk management that can be use for multinationals. Many companies use forward contracts and options, short term borrowing, discounting to mitigate a risk of foreign exchange transactions. Internal hedging techniques less used by companies as part of their hedging strategy. Management can set acceptable level of risk, which monitored daily. Management can monitors the risk of exchange rate changes. Management can make judgments to decide a fixed or variable rate is more effective for a particular period. However, the monitoring of risk not gives any safeguards against losses if the market situation will go beyond of the predicted limits. According the statistic data we see that a derivatives trading, for whatever reasons, are not durable in practice in both countries: India and Ukraine. The prospect of further research – searching of causes of this phenomenon.Hedging techniques can classified into internal and external depending on their use - within or outside the enterprise group. Many companies use forward contract and options, short term borrowing, discounting to mitigate a risk of foreign exchange transactions. Internal hedging techniques less used by companies as part of their hedging strategy. The aims of shared risk management program are to minimize the potential negative impact on the financial performance for those risks that are amenable or risk management is not a core activity of TNCs. Management can set acceptable level of risk, which monitored daily. Management can monitor the risk of exchange rate changes. Management can make judgments to decide a fixed or variable rate is more effective for a particular period. Borrowings at variable interest rates expose the Group to interest rate risk. Borrowings issued at fixed interest rates expose the Group changes in the fair value of the interest rate. However, the monitoring of risk not gives any safeguards against losses if the market situation will go beyond of the predicted limits. According the statistic data we see that a derivatives trading, for whatever reasons, are not durable in practice in both countries: India and Ukraine. The prospect of further research – searching of causes of this phenomenon