Dell Mercosur: Getting Real In Brazil – Case Study Example
Dell Mercosur: Getting Real in Brazil" There are four steps in exposure strategy used by any management. Firstly, a company must forecast the degree of exposure in every major currency in which it operates. The company will then develop a monitoring system that will monitor the level of fluctuations and exposure in the exchange rate which provides protection against the risk. There is then an assigning of responsibilities that hedge exposure and deciding whether to decentralize or centralize the exposure management. Finally, there is a selection of appropriate hedging tool including diversity of companys operations such as balance sheet and exposure netting hedge (Berghöfer & Lucey, 2013).
Dell monitors foreign currency exposure to ensure the overall effectiveness of its hedge positions. The company also designs and executes its strategies to hedge the exposure. Dell uses purchased option contracts designated as cash flow hedges in order to protect against any foreign exchange risk. This company also employs forward contracts in order to hedge economically monitory liabilities and assets, primary receivables and payables that have a denomination in foreign currency. The company’s strategy is to hedge all foreign exchange risk that is aggressive hedging strategy (Daniels, Radebaugh & Sullivan, 2011).
The company needs to have a proper revenue management program. How a company manages its revenue will go along helping the company to be stable when the economy is not doing well (Erzurumlu, Tanrisever & Joglekar, 2011). Foreign currency in its subsidiaries needs a harmonization to ensure that the company does not suffer losses due to inflation. The company needs to have a policy that will ensure the declining economies of various countries do not affect its operations.
Berghöfer, A. & Lucey, B. (2013). Fuel Hedging, Operational Hedging and Risk Exposure–
Evidence from the Global Airline Industry. Operational Hedging and Risk Exposure– Evidence from the Global Airline Industry (August 2013).
Daniels, J., Radebaugh, L., & Sullivan, D. (2011). International business, environment & operations (13th ed.). Upper Saddle River, NJ: Prentice Hall,
Erzurumlu, S., Tanrisever, F., & Joglekar, N. (2011). Operational Hedging Strategies to
Overcome Financial Constraints during Clean Technology Start-Up and Growth. Advanced analytics for green and sustainable economic development: Supply
models and financial technologies, IGI Publishing, Hershey, 112-131.