Economic Exposure Management at BMW

1. What is the nature of BMW’s FX exposure? What fundamental financial principle should BMW use to neutralize the impact of FX rate movements on their results?

In recent years BMW have experienced massive growth. India, Russia, China and Europe becomes the largest market for the company. Due to the exchange rate changes the profit of the company often experience decline. By moving production facilities to various countries not only foreign exchange risk is managed appropriately but also the organization become more responsive to its customers.

2. How did BMW decide to tackle the problem? Do you see any problems with BMW’s approach and implementation?

BMW tackle the problem of foreign risk exposure by opening production facilities in its major markets. The strategy which the BMW implemented proved successful which means that there was no major problem in the strategy.

3. What differences if any exist in BMW’s approach to FX exposure management in North America and Asia?

There are no major difference in managing FX exposure in North America & Asia. The corporation has invested in US and Asian countries. However company increase it’s purchasing in US dollars especially in North American region (Melville, 2017).

4. Why did BMW decide to consolidate FX risk management globally in its Munich group treasury? What principle are they implementing and what are its advantages for the group?

Through consolidating risk management globally the corporation can manage the risk more efficiently. In different parts of the world, the factors that cause the risk are different, therefore through this approach the corporation can not only manage the risk more efficiently but also the organization can sustain in the long run.

5. BMW’s and Western Mining’s pursued to very different strategies to address FX exposure. What are their respective FX risk management strategies? Why did each company 20 choose their respective strategy?

BMW and WMC implement different strategies because the situation of both the organizations is different. The organization implement those strategies which they consider best for their operations (Sercu, 2009).