Calculate the FX position of Company A based on the values in the following chart. Explain the benefits

this company will experience according to its FX position.

FOREIGN EXCHANGE POSITION (IN USD)
Confirmed exposure
Cash	340,000
Accounts receivable	1,200,000
Firm orders - sales	6,400,000
Accounts payable	(155,000)
Firm orders - purchases	(1,500,000)
Other confirmed receipts 0	0
Other confirmed disbursements	0
Confirmed Exposure
Unconfirmed Exposure
Expected sales	15,250,000
Expected purchases	(2,040,000)
Other expected receipts	0
Other expected disbursements	0
Unconfirmed Exposure
Total exposure
Foreign exchange contracts
FX forward contracts used to sell U.S. dollars	(5,200,000)
FOREIGN EXCHANGE POSITION

 

Part B: Identify and describe four types of political risks giving an example of a country which exhibit each. 4 points

Part C: A Swedish travel services company is analyzing the feasibility of opening a branch office in Malaysia. They have developed the following economic risk profile: 6 points

Risk	Likelihood/Probability	Severity of impact	Threat Value	Rank (1-3)
Negative economic growth	Remote	Critical
Unfavourable exchange controls	Remote	Serious
Implementation of new unfavourable laws or trade agreements	Occasional	Catastrophic

 

a. Complete the chart with the associated threat values.

b. Rank the risks in order of priority.

c. If the organization decides to introduce strategies to reduce its economic risk, what is one strategy that it could implement?