Extract from:Financial Times;October 29 ,2012

The story: BMW Group, owner of the BMW, Mini and Rolls-Royce brands, has been based in Munich since its founding in 1916. But by 2011, only 17 per cent of the cars it sold were bought in Germany. 3 In recent years, China has become BMWs fastest-growing market, accounting for 14 per cent of BMWs global sales volume in 2011. India, Russia and eastern Europe have also become key markets. The challenge. Despite rising sales revenues, BMW was conscious that its profits were often severely eroded by changes in exchange rates. The companys own calculations in its annual reports suggest that the negative effect of exchange rates totalled 2.4bn between 2005 and 2009.

Explain the different types of foreign exchange risks faced by the BMW Group and the internal techniques that the group can use to manage/reduce such exposure. (15 marks)