Foreign Exchange Risk Management at Aston Martin

Foreign Exchange Risk Management at Aston Martin

Individual Report

DEADLINE: Thursday, 16^th July, 2020 by 1pm

Format: Written Report

Formatting Guidelines:

• Font size: 12
• Text alignment: Justify
• Line spacing: 5
• Word limit: 2000 words (+/- 10% allowance)

Submission: Online (Turn-It-In)

Coursework weight: 50% of module mark

Assignment:

The coursework assignment for this module is in the form of an individual report. You are asked to develop and propose a solution for a company’s transaction/economic exposure to foreign currency risk. For this you will be expected to use a variety of resources and databases (both written and electronic) and manage time effectively.

You are asked to treat this report as though you work for Aston Martin and you were asked by your line manager (boss) to prepare a report about Aston’s foreign exchange risk exposure and management. This is a general company report for internal use. There is nothing new in Aston’s business that you need to focus on but rather it is the company’s general situation. You are looking at the whole company and market and are considering a range of options for both the nature of the FX exposure as well as what it can potentially do to hedge its FX exposure (both economic and transaction exposure). Using what we have learned in this module, you are required to develop a report that will help Aston’s senior management team to plan for the future.

What you need to do:

1. Present a brief and critical overview of Aston Martin as well as its financial circumstances with special focus on things that will be relevant for foreign exchange transaction/economic exposure: Where are they headquartered and what is their functioning currency? Where do they manufacture their products and/or source raw materials? Where do they sell their products? In what proportion? What are the main currencies they need? Etc. (approx. 400 words)

(20%)

2. Critically discuss the company’s current foreign exchange risk management policy (focusing on transaction/economic exposure). For this you will need to go through their financial statements (e.g. latest annual report) and/or other company documents and discuss if there is anything already in place (e.g. FX derivatives they may already have in their accounts and amounts of foreign currency and similar). Draw conclusions from this analysis. (approx. 600 words)

(25%)

3. Drawing on 1. and 2. above, summarise the company’s most important FX exposures, and analyse what hedging options they should use in the short-, medium- and long-term to manage their business effectively. Outline and critically discuss your recommendations on the FX hedging strategy, informed by (i) what we have studied about hedging strategies in the module, and (ii) current/forecast market conditions, in particular regarding relevant FX rates (e.g. if the price of the $US is expected to go up or down in the coming months, what does that mean for their hedging strategy?) You may wish to use graphs or charts obtained from reputable sources. (approx. 600 words)

(20%)

4. Finally, make your conclusions about the company’s current FX exposure and your own recommendations. Consider that this report will be read by people who have limited time on their hands and may only focus on your main findings and recommendations: use this space to focus on what’s most important; what are the main challenges when it comes to FX exposure and what is the best way forward? (approx. 400 words)

(15%)

5. To research this coursework use multiple resources: textbooks; the Financial Times; official company accounts and other reputable news sources/articles from journals/books. Don’t forget to cite all data sources and label charts/graphs properly. The quantity and quality of sources will be taken into consideration.

(15%)

6. Format and quality of writing: Use of any business/scientific jargon clearly explained; quality of writing and presentation of the report and use of the Harvard Referencing Style for any citations.                               (5%)

Things to note:

• The word count is for guidance only. You may need fewer words in some sections and more in others.
• How you structure the report is up to you. You can call headings whatever you like and have as many sections as you think is appropriate. The report will be judged on the overall readability and clarity of structure. You may have a title page but there is no need for an executive summary as we have a specific conclusions/recommendation section that is similar to an abstract/summary.