Foreign Exchange Management in Perfect Pieces Limited

Pages: 4 (1591 words) Published: August 12, 2014
Allied Academies International Conference

page 73

CASE STUDY: FOREIGN EXCHANGE MANAGEMENT
IN PERFECT PIECES LTD
Ernest Mudogo, Zayed University
ernest.mudogo@zu.ac.ae

Rae Weston, Macquarie Graduate School of Management
rweston@laurel.ocs.mq.edu.au
ABSTRACT
The primary objective of this case study is to discuss issues which leave Perfect Pieces (PP) Ltd susceptible to foreign exchange exposure management, FEEM, problems. As a result of engaging in international business through foreign sales, procurement of foreign inputs, and facing competition with other manufacturers whose costs are denominated in foreign currency, PP Ltd is exposed to foreign exchange risk. This case allows students to consider elements of corporate policy on foreign exchange exposure management and the measures to be implemented in managing exposure. The case includes extracts from interviews with company management and staff and shows how wider organizational structure issues can impact adversely on foreign exchange exposure management decisions. The existence of a corporate policy on exposure management should influence exposure management organizational structure, understanding of FEEM imperatives, and clarification of the roles and responsibilities assigned within the corporation. Issues pertinent to such a policy include forming a FEEM committee to oversee the development and implementation of proper foreign exchange management information systems. INTRODUCTION

PP Ltd began business in 1980 as a manufacturer of roof tiles. The company was formed as a closely held family business when its current general manager, James Long, resigned from the Australian public service where he had worked for twenty years as an engineer. Over the years PP Ltd has experienced sales growth of 15 to 25 per cent per year. From a small beginning, PP Ltd's operations expanded tremendously in the 1980s and early 1990s. In 1998 PP Ltd's sales revenue amounted to about $ 4 million.

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