Are manufacturers that hedge against risks more risky ?

A Wall Street Journal article (April 13, 2011) describes the worries of manufacturers, such as Caterpillar, Ford, Boeing etc that use hedging instruments to decrease risk. Their concern is whether their banks could now require them to back up any additional risk with cash or assets, thus potentially decreasing their working capital. The manufacturers claim that such requirements will decrease the cash available for capital investments or job creation.  Do manufacturers who buy hedging instruments face greater risks ? Given that most derivatives do not require any collateral, why should manufacturers worry about the behavior of their banks ? Will the government requirement from banks permit signals in advance of any increased manufacturer risk ?

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About aviyer2010

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

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