The foreign exchange risk management is important given the present condition of the economy in the world. The business dealing with the export and the imports are variably affected. In the case of Jeep, most of the sales will take in the form of exports. Therefore, it becomes imperative for the management to take control of the situation in the case of foreign exchange risk. The company has a dedicated financial department which looks into the matter of forecasting the conditions of the economy of the state.
The management would analyze each transaction in the excess of $10,000.
The management hedges the funds to ensure that not much is lost due to the changes in the movement of the global economy. By Hedging, the management will create contracts with the contractors in the country that would help them in the course of adverse changes in the currency movements. The operations in the country will be looked over by a person from the stables of the company and he will report to the top level management.
The management benchmarks the standards to be maintained in the case of the operations.
This will help in the appraisal of the operations in the country and will help in analyzing the risks associated in the country. However, the most important part in the operation is forecasting and this is done by the top level of the management.
The success of the foreign exchange risk management of the company depends on the forecasting technique of the management. (Foreign exchange risk management guidelines, n. d. ) The money needed for the project is huge and there are some possible sources from which the money can be garnered. The money for the operations will be taken as loan.
The Czech National Bank (CNB) is one of the sources that can supply the money for the project. The loans provided to the economy including the national and the international companies amount to 213437 Koruna with the help of time series indicator as of 2005. (Data selection, n. d. ). The amount needed by Jeep is much more than that amount and it cannot be financed by CNB alone. The CNB makes the payment available through the banks in the system. The loan to be taken from the system is 391,000. The remaining is to be taken from the European Investment Bank (EIB). The EIB gives loan to the long term projects that are feasible.
It depends on the project of Jeep on which the loan will be provided. Given the feasibility of the project, the EIB will provide the loans for the facility in Czech Republic. (Products and services, n. d. ) Given the conditions of the global venture, the project is feasible. The economic conditions in Czech Republic are one of the most stable in the Central Europe. The political conditions are like that in the USA. The economy might be in recession because of the global turmoil but it offers the company an opportunity to unearth valuable resources in the form of workers and other materials.
The loans will be available. In the case of the sales of the car, the geographical conditions of the region offer a suitable backdrop for the cars. The hilly terrain of the region is good for the cars. Setting up the facility in Czech Republic, opens up the market of the Balkans and Central Europe to the company. The geographical conditions in the area are suitable for Jeep and this will help in the increase of sales for the company. Therefore, the project is a feasible one. Reference Czech Republic Economy Watch. (2010).
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