Financial risks Essay Example | Topics and Well Written Essays - 500 words

Financial risks - Essay ExampleTransaction exposure is linked with the future fetch or loss which the company will be making related to future obligation settlements. To handle transitional risk, company goes for different hedging techniques, that hedging if more profitable in the short terms as compared to long term (Shim, Shim & Siegel, 2008, pp 365).Economic exposure is the most sensitive exposure because its consequence is far broader as compared to the others. The extent to which frugal exposure will affect a company depends on nature of the company or the industry in which company is. These economic factors can be macro economic factors which have their impact world wide or can be micro economic factors like socio-economic factors or political factors specifically to a particular country (Shim, Shim & Siegel, 2008, pp 365).The main motto of any organization is to reduce cost of production and to change magnitude profit for the stakeholders. As through marketing, the manage ment tries to increase revenue, so such strategies are being made through which BMW can increase their sale in those countries where currency is appreciating or is over valued and they will restructure their marketing plan for the countries where currency is depreciating or are undervalued. Same strategy is adopted while launching new product into market BMW introduces its new products when currencies are appreciating so that they can collect revenue as high as possible. hence the process is more or less like a long term call option. BMW remain highly cautious for finalizing their marketing expenditure. Company continuously keeps in mind that marginal expenditure made on any unit should be less than the marginal profit per unit.Strategy for production is exactly the reverse of marketing strategy as the company always tries to lower down production cost as far as possible. BMW expands its production force