Currency Forecasting in Mncs

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FORECASTING
“ Financial risks and those relating to the provision of financial services

Currency risks
The sale of vehicles outside the eurozone gives rise to exchange risks. The BMW Group’s currency risk in 2012 was dominated by the US dollar, the Chinese renminbi, the British pound, the Russian rouble and the Japanese yen. Foreign currency risks are determined for forecast exposures measured using cash flow-at-risk models and scenario analyses. Operational currency management is based on the results provided by these tools. The BMW Group manages currency risks both at a strategic (medium and long term) and at an operating level (short and medium term). In the medium and long term, foreign exchange risks are managed by “natural hedging”, in other words by increasing the volume of purchases denominated in foreign currency or increasing the volume of local production. In this context, the expansion of the plant in Spartanburg, USA, and the opening of the BMW Brilliance joint venture’s new plant in Tiexi in 2012 at the Shenyang site, China, are helping to reduce foreign exchange risks in two major sales markets. For operating purposes (short and medium term), currency risks are hedged on the financial markets.” The BMW Group measures currency risk using a cash-flow-at-risk model. – Annual report BMW Group 2012, p.70

Number of subsidiaries of BMW around the World

“Consolidated companies
The BMW Group Financial Statements include, besides BMW AG, all material subsidiaries, four special purpose securities funds and 26 special purpose trusts (almost all used for asset-backed financing transactions). 51 subsidiaries are not consolidated on the grounds that their inclusion would not influence the economic decisions of users of the Group Financial Statements. Non-inclusion of operating subsidiaries reduces total Group revenues by 0.9 % (2011: 0.7 %).” * Annual report BMW Group 2012, p.87

Currency markets do fluctuate

BMW thinks that public-sector...
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