tailieunhanh - Foreign Exchange Hedging Strategies at General Motors Critique

Review important topics, discuss material covered well, cover material missed As the main contents of the lecture "Foreign Exchange Hedging Strategies at General Motors Critique". Invite you to refer to the lecture content more learning materials and research. | Foreign Exchange Hedging Strategies at General Motors Critique Luke Bennrubi Britten Feldman Hillary Felice Drew Ferwalt Overview Review important topics Discuss material covered well Cover material missed GM Hedging Policies Commercial (Operating) Exposure: Volatile currencies are hedged for only 6 months and risk threshold lowered to $5 million from $10 million Commercial (Capital) Exposure: Amounts in excess of $1 million not $10 million (typo) Accounting Policies: Held gains and losses from hedging in shareholder’s equity account Reporting: Hedging activities closely tracked; policy lead to passive switch GM Hedging Policy Objectives Reduce cash flow and earnings volatility Minimize the management time and costs dedicated to global FX management Align FX management in a manner consistent with how GM operates its automotive business Passive vs. Active Hedging Currency exposure is inevitable when doing business in foreign markets Passive Hedging Uses forward/options contracts . | Foreign Exchange Hedging Strategies at General Motors Critique Luke Bennrubi Britten Feldman Hillary Felice Drew Ferwalt Overview Review important topics Discuss material covered well Cover material missed GM Hedging Policies Commercial (Operating) Exposure: Volatile currencies are hedged for only 6 months and risk threshold lowered to $5 million from $10 million Commercial (Capital) Exposure: Amounts in excess of $1 million not $10 million (typo) Accounting Policies: Held gains and losses from hedging in shareholder’s equity account Reporting: Hedging activities closely tracked; policy lead to passive switch GM Hedging Policy Objectives Reduce cash flow and earnings volatility Minimize the management time and costs dedicated to global FX management Align FX management in a manner consistent with how GM operates its automotive business Passive vs. Active Hedging Currency exposure is inevitable when doing business in foreign markets Passive Hedging Uses forward/options contracts (0-100%) Protects against exchange rate volatility Active Hedging Managers exploit inefficiencies in market Fundamental, technical, dynamic, option-based “The second objective was a consequence of an internal study that determined that investment of resources in active FX (foreign exchange) management had not resulted in significant outperformance of passive benchmarks.” Transactional Exposure Definition: Gains and losses when transactions are settled in currency other than reporting currency Stem from many different things Buying activities Selling activities Financing decisions (borrowing) Translational Exposures Definition: Gains and losses that arise when assets and liabilities are translated back into reporting currency Determined by functional currency GM does not hedge translational exposures Generally not large enough When large enough, senior finance executives are notified Canadian Exposure Large Canadian dollar assets and liabilities Supplied GM operations in N. America Relied on