Treasury experts at rabobank and abn amro indicated

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Treasury experts at Rabobank and ABN-AMRO indicated forward contracts to be the most common type of hedging product for both small and large businesses. Expertise and skills are cited by both interviews in managing currency risk management. Additionally, it was revealed that risk shifting to counterparties and matching were other methods to consider when reducing exchange risk. Highlighted too was the need for a company to be aware of risk faced and take necessary steps early in the firm’s life cycle. Moreover, a firm needed to weigh the benefits and costs of risk management. Finally, it is recommended that Lanka ice group of companies implement a twelve step process, as a corporate wide treasury management programme in managing its exposure. First and foremost the firm needs to address the issue from a policy point of view by clearly defining expectations, scope, and breadth of its risk management activities. Primarily the firm should consider matching purchases and payments for its glass. The firm should inquire about the possibilities of contract clauses with its suppliers to either pay early or delay the payments thus alleviating pressure on the cash conversion cycle. Additionally it is recommended that the firm consult with its banker on forward contracts as a supplement to
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C.S. NKHATA MFA (0859294) 3 | P a g e the Letter of Credit. The company also needs to properly measure its exposure. Having stated the above it is the view that the trading portfolio is still growing and therefore the firm doesn’t need a radical shift from current practices, but the careful monitoring and evaluation of exposure will ensure the firm is prepared for a range of eventualities.
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