Toyota Motor’s Exchange Rate Risk Management: Residual Risk and Response Strategies after Forward Hedging
DOI:
https://doi.org/10.54097/z03dy213Keywords:
Residual risk; exchange rate risk; risk hedging.Abstract
In the context of global economic integration, exchange rate fluctuations have intensified, and the issue of exchange rate risks for multinational automakers has become a focus. This paper takes Toyota Motor as the research object and conducts an analysis based on the residual risks after foreign exchange forward hedging against exchange rate risks. Toyota is exposed to exchange rate risk due to its global layout, and can effectively hedge exchange rate risk by using foreign exchange forward contracts. However, three residual risks—basis risk, credit risk, and operational risk—remain after hedging, which undermine the company’s financial profits and market operations. This paper puts forward the solutions of dynamically adjusting the term of the forward contract and hedging ratio, carefully selecting the counterparty, setting up the risk warning line, and improving the management of the operation process. In the future, it is expected that multinational automakers will improve the resolution of residual risks and promote the stability of their global operations.
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