1. Your company has exposure in multiple currencies. Following table provides you projections for the forthcoming financial year. Work out a comprehensive forex risk management policy for your company. Treasury will function as profit centre at the same time may incur a quantified loss. You should be able to arrive at the stop loss limit for each currency.

GBP USD. EUR

Export in millions 30. 20 20

Import in millions. 20. 10. 10

Total amount 50 30. 30

Conversion Rate. 93 75. 82

Forex Risk management fund allotted for this year:-Rs 4.50 crores

The framework for the answer is given below:

Currency

Conversion Rate in INR (A)

Exposure (Total Import+Export) (B)

Value of Exposure in INR (C )=A*B)

Percentage % (C/Total of C) =(D)

Risk allotment E= (D*45,000,000)

Risk per unit of currency (F = E/B)

Stop Loss Limit (Exports) (A F)

Imports Stop Loss Limits (Imports) (A + F)