You work for the firm Premium situated in Singapore, and your boss has become concerned about the current economic environment, especially how it is related to the different types of exposure that your firm may face in the near future. You are asked to provide a report, which evaluates your firm’s exposure, the risk management implications for your firm, and possible hedging strategies for the next 6 months. You are also required to provide a recommendation for what your firm should do.
Firm PremiumM is a machinery manufacturer located in Singapore.
The firm imports parts to Singapore from foreign suppliers in Japan, South Korea, and Germany.
The firm exports machines to Australia, the United States, Germany, and Norway.
The firm has a payment of 60,000,000 JPY due in 1 month and a payment of 50,000,000JPY is due in 6 months to their Supplier in Japan, a payment of 6,000,000 USD due in 3 months to their Supplier in South Korea, and three payments of 2,000,000 EUR to their Supplier in Germany are due in 1 month, 3 months, and in 6 months, respectively.
The firm is due to receive 5,000,000 AUD and 5,000,000 SGD from their customer in Australia in 3 months, 6,000,000 USD from their customer in the US in 3 months, 6,000,000 EUR from their customer in Germany in 6 months and 60,000,000 NOK from their customer in Norway in 3 months.
The firm is concerned about the impacts of the high inflation rate not only in Singapore but also globally on their business.
The firm is also concerned about the impacts of a series of interest rate rises globally on the firm.