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. (10 marks)

	GBP	USD	EUR
Exports (Amount in millions)	30	20	20
Imports (Amount in millions)	20	10	10
Total (Amount in millions)	50	30	30
Conversion Rate in INR	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)