Philip Morris International as a Leading International

Philip Morris International As a leading international company producing top cigarette brands, the need for the effective and professional management of international FX and finance risks at Philip Morris International cannot be overstated. In this text, I concern myself with the individual tasked with the international financial management of the firm, his background and the approach he uses in the management of foreign risks.

Waldemer, Hermann As Philip Morris International's C.F.O., Hermann Waldemer is the individual squarely in charge of all the financial and FX transactions at the cigarette firm. Though he joined the company (before its spin off from the Altria Group) back in 1987, it was not until 2008 that Mr. Waldemer assumed the role of C.F.O. Over the years, Mr. Waldemer has held a number of positions at Philip Morris including acting as head of the company's divisions in Germany and France.

It can however be noted that his skills for the current assignment were further sharpened with his appointment as the firm's Western Europe President sometime in 2003. Here, Mr. Waldemer was responsible for the management of all the regional undertakings for Philip Morris International. In addition to having a degree in economics, finance and tax; Mr. Waldemer also happens to be a certified public accountant.

The Management of Foreign Risks at Philip Morris International A relatively centralized function at Philip Morris International, Treasury (under the oversight of Hermann Waldemer) is responsible for a wide range of activities including commercial paper funding, money market undertakings as well as foreign exchange dealings.

It can be noted that in the recent past, extensions have been made in regard to treasury's mandate when it comes to activities like hedging commercial risks for major subsidiaries of Philip Morris International falling under the scope of the central treasury at Switzerland which also acts as the company's headquarters. Chiefly, currency swaps which are utilized in the intercompany multicurrency loan portfolio (in-house) hedging make up the bulk of Philip Morris International's transactional volumes in regard to foreign exchange.

Madura (2008) notes that companies increasingly utilize currency swaps for purposes of hedging their exposure to fluctuations in regard to foreign exchange. According to a press release by John Jacob (2011), who happens to be in charge of the treasury's day-to-day operations at Philip Morris International, sales (international) and the purchase of raw materials comprise yet another transactional exposure. These are however dealt with at the headquarter level selectively by way of hedging. The same case applies to net investment hedges.

When it comes to FX hedging policy, the same press release states that some hedge activities at Philip Morris International are mandatory. This is more so the case when it comes to foreign currency funding. However, when it comes to net investment hedging or other transactions requiring hedging decisions, the authorization of either the Chief Financial Officer or the Treasurer is usually required. Further, speculation is not allowed and thus there must be a relationship between the commercial exposure (underlying) and any hedging activity. In this.