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Managing Operating Exposure and FX Risk at Nissan:
Global businesses are usually exposed to financial risks like currency volatility. The foreign exchange risks, which are commonly known as FX risks, have significant effects on all aspects of a global company. Notably, the foreign exchange risks affect firms across various industries including the automobile industry. In this industry, the operations and manufacturing processes of auto makers are usually affected by currency fluctuations. An example of a global firm in the automobile industry that has been involved in managing the foreign exchange risks and operating exposure is Nissan.
In 1999, Nissan was in a death spiral as the firm was experiencing heavy losses, carrying massive debts, and has a bad reputation. During this period, Carlos Ghosn was appointed as the Chief Executive Officer in order to help save the company that was sinking into further challenges and complexities. In attempts to rescue the firm, it was important for Nissan's state...
Notably, Ghosn managed to enable Nissan to find its killer instinct as the firm turned out great cars and achieved the highest profit margins in the automobile industry (Book Review, 2005). The ability of Ghosn to rescue the company from its poor state is attributed to the measures he implemented in managing the global financial risk.
Ghosn turned the fortunes of Nissan through following some of the major steps in managing global financial risks. These steps, which were designed by Well Fargo's Dave Napalo, help in the establishment of a successful corporate foreign exchange policy. First, the CEO indentified how the deep financial crisis had been reached and defined the corporate philosophy and objectives together with the management as the first step to mitigating financial exposures. In this case, the main corporate philosophy and objective established by the firm was to achieve the highest profits margins in the…
References:
Book Review. (2005, January 17). The Gaijin Who Saved Nissan. Retrieved December 7, 2012,
from http://www.businessweek.com/stories/2005-01-16/the-gaijin-who-saved-nissan
Kim, Y. & McElreath, R. (2001). Managing Operating Exposure: A Case Study of the Automobile Industry. Multinational Business Review, 9(1), 21.
Nguyen, C. (2011, October 25). How Nissan Bucked the Auto-bailout Trend. Retrieved December 7, 2012, from http://bizcovering.com/management/how-nissan-bucked-the-auto-bailout-trend/
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