1. Discuss the increase in importance of risk management to all businesses (with an emphasis on listed ones) over the last few years and the role of Board of directors in risk management. [10 marks]

2. ANC is a Ghanaian based company engaged in manufacturing of fast moving consumer goods (FMCG) has recently imported raw materials from France with an invoice value of US$3,500,000 payable in three months time. Due to the Companys efficient production capacity, it has finished production and exported finished products to Italy. Consequent to this, the Italian Customer has been invoiced for US$5,500,000 payable in three months time.

Below is the current spot and forward rates for the transactions:

Spot GHS/ US$ 5.7250 -- 5.7325

Three-month forward rate GHS/ US$ 5.6945 -- 5.7025

Current Money Market rates per annum are as follows:

Deposit Borrow

US$ three month interest rate might be quoted as: 0.11 0.132

GH three month interest rate might be quoted as: 0.125 0.1475

Required:

1. Evaluate the main sources of financial risk for ANC [ 6 marks]
2. Demonstrate with relevant calculations how the ANC, the Ghanaian Company, can hedge its exposure to foreign exchange risk using, advice ANCs finance director as to which of the hedging strategies he/she should adopt.

)The Forward Markets [3 marks]

) Enumerate three (3) strategies for managing foreign currency risk [6 marks]