Read: CS Publishing Inc. Foreign Exchange Risk Management

Questions:

1. What challenges has Martha Singh recently identified, and why is it a concern now? How serious is the problem? What alternatives can she consider to manage these challenges?

2. Why is CSPub changing its business model? What are the pros and cons of making these changes? What types of risk does CSPub face in changing its business model?

3. Is CSPub facing any transaction risk as a result of this change in business model? How large is the risk? What tools can be used to manage this risk? Assuming swings of plus or minus 10% in the exchange rate, how would different risk management strategies affect the magnitude of the transaction risk?

4. IS CSPub facing any translation risk as a result of the business model change? How large? What tools can be used to manage it?

5. Is CSPub facing any operating risk as a result of this change? How large is this risk? What tools can be used to manage it?

6. Summarize the risks facing CSPub and CSP. How should Singh manage each of the risks, if at all? What might an FX risk management policy look like for CSP and CSPub?