Operational Hedging vs Currency Hedging

An article in the Wall Street Journal (February 19, 2011) describes the move towards operational hedging – by shifting production across a global network of plants rather than pay for currency hedging. The article lists Nissan, Autoliv (seatbelt and airbag manufacturer), Becton Dickinson as companies that have decided to do NO currency hedging but to rely on their operational hedging capabilities. The reasons listed are (a) Increased cost to buy currency hedges, (b) Difficulty in explaining hedging costs to investors and (c) A preference for passing on volatility to shareholders and letting them hedge their portfolios.  Does the logic used by these companies suggest that currency hedging choices will vary by industry ? Is an outsourced global supply chain inherently more flexible and therefore able to absorb currency risks ?

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About aviyer2010

Professor
This entry was posted in Global Contexts, Operations Management, Supply Chain Issues and tagged , , , . Bookmark the permalink.

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