International Financial Management Written Report You are asked to develop and propose a solution to a company’s transaction and translation exposure. For this, you will be expected to use a variety of resources and databases (both written and electronic) and manage time effectively.
You are asked to treat this report as though you work for Nestlé and you were asked by your line manager (boss) to prepare a report for Nestlé’s transaction exposure so that the company can adequately prepare. This is a general company report for internal use. There is nothing new in Nestlé’s business that you need to focus on but rather it is the company’s general situation. You are looking at the whole company and market and are considering a range of options for both the nature of the exposure as well as what it can potentially do to hedge its foreign exchange exposure. Using what we have learned in this module to manage various exposures, you are required to develop a report that will help Nestlé’s senior management team to plan for the future.
What you need to do:
- Present a brief and critical overview of Nestlé as well as its financial circumstances with special focus on things that will be relevant for the transaction and translation exposure: (markets where it operates vs its HQ location; where does it source raw materials; what percentage of its income comes from abroad; where does it have subsidiaries and foreign local operations of any kind; what are the main currencies it needs). (approx. 400 words.) (20%)
- Summarise what you have determined that the current situation with the management of transaction and translation exposure is. For this, you will probably need to go through Nestlé’s financial statements and/or other company documents and discuss if there is anything already in place for this (things like derivatives the may already have in their accounts and amounts of foreign currency and similar). Draw conclusions from this analysis. (approx. 600 words); (25%)
- From what you have found out, analyze what hedging options should Nestlé use in order to manage its business effectively. Using what we have studied about hedging strategies and following what you have found about what the most important exposures that Nestlé has, outline and critically discuss your recommendations on the hedging strategy. For this analysis, you may also need to consult the world markets for foreign exchange and use trends and current market conditions to inform and guide your hedging recommendations. (e.g. if the price of the $US is expected to be going up or down in the coming months or year, what does that mean for the hedging strategy of Nestlé.) You may also wish to use graphs or charts that you have obtained from Bloomberg or the Financial Times. (approx. 600 words)(20%)
- Finally, make your recommendations and conclusions of Nestlé’s foreign exchange exposure and management recommendations. Give reasons. Consider that this report will be read by people who have limited time on their hands and they may only focus on your main findings and recommendations. Therefore use this space to focus on what’s most important for Nestlé. What are its main challenges when it comes to foreign exchange exposure and what is the best way forward? (approx. 400 words)(15%)
- To research this coursework use multiple resources: textbooks (look in the library or online); the Financial Markets Suite (Bloomberg); Financial Times (use the school subscription, see handbook for more details); official company accounts and other reputable news sources/articles from journals/books. Don’t forget to cite data sources and label charts and graphs properly. The quality of your sources will be taken into consideration. (15%)
- Format and quality of writing. Use of any business/scientific jargon clearly explained; quality of writing and presentation of the report and use of the Harvard Referencing Style for any citations. (5%)
Things to note:
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