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International Business: Managing Global Financial Risk

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Managing operating exposure and FX risk at Nissan.

Global businesses are often exposed to financial risks such as currency volatility. These foreign exchange (FX) risks affect all aspects of a global firm. Auto makers' operations and manufacturing can be affected by currency fluctuations. In the assigned articles a you will find out how Nissan and other firms managed this FX risk.

Helpful Reading:

Book Review (2005) "The gaijin who saved Nissan", Business Week. Retrieved from: http://www.businessweek.com/magazine/content/05_03/b3916021_mz005.htm
Napolo, D. (2005) "Managing FX risk; an eight step plan to establish corporate foreign exchange policy", Treasury & Risk Management magazine, March 2005.
Kim, Y. (2001)"Managing operating exposure, Multinational Business Review, 9(1), 21-26. Retrieved November 18, 2011, from ABI/INFORM Global. (Document ID: 69045429).


? Write a paper, answering these questions:
? What did Carlos Ghosn and Nissan do in order to manage global financial risk and why?
? Did Nissan follow Napolo's (2005) 8 steps? Discuss which steps they did and those they did not follow.
? Draw conclusions and list supporting references and cite sources.

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Solution Preview

What Carlos Ghosn and Nissan did to manage global financial risk?

Carlos Ghosn was hired as the chief executive officer by Nissan when the company had been recording continued losses. Ghosn identified that the company had to change how it conducts business in order to improve performance. Ghosn's strategy to improve performance included reducing the company's purchasing costs by 20%, decrease capacity by 30%, close five manufacturing plants, and 20,000 were displaced through layoffs and attrition (Book Review, 2005). Ghosn approach was surprising to the Japanese since to them stability was more important compared to sound financial management. Ghosn also reduced the number of steel suppliers from previous five suppliers to three.

Ghosn established cross functional teams from Renault and Nissan to identify any problems in engineering, design and sales and develop high but realistic performance goals (Book Review, 2005). Employees in the company were encouraged to achieve the goals and were informed that backsliding would not be accepted.

Ghosn implemented the strategies so as to free capital resources from assets that were non strategic and noncore and therefore the company could ...

Solution Summary

The solution discusses how to manage global financial risk.