Since 1973 implemented the floating exchange rate system, the currency exchange rate has fluctuated frequently, not only with a large amplitude, but also the strength and status of various major currencies have often changed. Before the reform and opening up in China, due to strict foreign exchange management and rigid exchange rate adjustment mechanism, most foreign-related enterprises did not really become the main body responsible for their own profits and losses, and foreign exchange risks were mainly borne by the state. With the reform of China's foreign exchange system and China's entry into WTO, banks and enterprises can no longer rely on the protection of * * *. Therefore, how to prevent foreign exchange risks has become a top priority for banks, enterprises and individuals.
One of the manifestations of foreign exchange risk is: foreign exchange transaction risk. Foreign exchange risk is caused by the exchange of domestic currency and foreign currency. The risks that foreign exchange banks undertake in foreign exchange transactions are mainly foreign exchange risks. The same risk will occur when enterprises other than banks make loans or borrowings in foreign currencies and conduct foreign exchange transactions with foreign currency loans and borrowings. Individuals buying and selling foreign exchange also have risks.
The second manifestation of foreign exchange risk is that the exchange of domestic currency for foreign currency for future foreign exchange transactions is risky because the applicable exchange rate for future transactions is not determined. This is the risk that occurs when general enterprises conduct trade transactions and non-trade transactions in foreign currency, so it is also called "transaction settlement risk".
The third manifestation of foreign exchange risk is: how to evaluate foreign currency when enterprises conduct accounting treatment and make final accounts of foreign currency claims and debts. For example, when handling final accounts and evaluating creditor's rights and debts, there will be differences in book gains and losses due to different exchange rates, so it is also called "risk assessment" or "foreign exchange translation risk".
The fourth manifestation of foreign exchange risk is: economic risk-refers to the risk that the expected future income of an enterprise or individual may suffer losses due to exchange rate changes.
The fifth manifestation of foreign exchange risk is: national risk-that is, political risk. Refers to the possibility of losses caused by the termination of foreign exchange transactions by enterprises or individuals due to national compulsion. Source: fx678
ForeignExchangeExposure refers to the possibility that the value of assets (creditor's rights, interest) and liabilities (debts, obligations) expressed in foreign currency will increase or decrease due to unexpected changes in foreign exchange rate in a certain period of time.
There are three kinds of foreign exchange risks.
I. Foreign exchange risks of enterprises
1, transaction risk
2. Accounting risk
3. Economic risks
Second, operational risks.
1. Risks of foreign exchange transactions-Banks and foreign exchange transactions: valet trading and proprietary trading.
2. Foreign exchange credit risk: the risk brought to the bank by the default of all parties in foreign exchange transactions.
3. Settlement risk.
Third, the risk of national foreign exchange reserves.
The risk that the devaluation of reserve currency will lead to a country's total foreign exchange reserves. It mainly includes the national foreign exchange inventory risk and the national foreign exchange reserve investment risk.
Since 1973, the floating exchange rate system was implemented by the international community, foreign exchange reserves of all countries in the world are facing the same operating environment, that is, the reserve currencies are diversified, the reserve currencies are mainly US dollars, and the exchange rate of reserve currencies including US dollars fluctuates greatly. In this way, the foreign exchange reserves of various countries are facing great risks.
As foreign exchange reserves are the most important part of international liquidity and an important symbol of a country's national strength, once the risks faced by foreign exchange reserves become a reality, the consequences will be very serious.
From the perspective of its fields, foreign exchange risk can be roughly divided into two categories: commercial exchange rate risk and financial exchange rate risk.
Commercial exchange rate risk: Commercial exchange rate risk mainly refers to the possibility of people suffering losses due to exchange rate changes in international trade, which is the most common and important risk among foreign exchange risks.
Financial exchange rate risk: Financial exchange rate risk includes credit and debt risk and reserve risk.
What is foreign exchange risk? What types of foreign exchange risks can be divided into? ForeignExchangeExposure refers to the possibility that the value of assets (creditor's rights, interest) and liabilities (debts, obligations) expressed in foreign currency will increase or decrease in a certain period due to unexpected changes in foreign exchange rate in foreign economic, trade, finance, foreign exchange reserve management and operation activities.
There are three kinds of foreign exchange risks:
Transaction risk refers to the risk that occurs in business activities;
Translation risk refers to the risk that the value of assets and liabilities changes with the exchange rate when the overseas subsidiaries are denominated in foreign currencies and their financial statements are merged into the financial statements of the parent company;
Economic risk refers to the change of company value due to unexpected exchange rate changes of future operating income.
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What is exchange rate risk?
Exchange rate risk, also known as foreign exchange risk, refers to the possibility of losses caused by exchange rate changes in economic activities in which economic entities hold or use foreign exchange.
Types of foreign exchange risk: transaction risk, conversion risk and economic risk.
1. Transaction exchange rate risk refers to the possibility that economic entities will suffer losses due to changes in foreign exchange rates in transactions denominated and received in foreign currencies. Trading risks mainly occur in the following situations:
(1) Import and export risks of goods and services.
(2) Risk of capital input and output.
(3) Risks of foreign exchange positions held by foreign exchange banks.
2. Conversion exchange rate risk, also known as accounting risk, refers to the possibility of book losses caused by exchange rate changes when economic entities convert the bookkeeping base currency into bookkeeping base currency in the accounting treatment of balance sheets. The bookkeeping base currency refers to various currencies used in circulation in economic entities and commercial activities. Bookkeeping functional currency refers to the reporting currency used in the preparation of consolidated financial statements, usually the local currency.
3. Economic exchange rate risk, also known as operational risk, refers to a potential loss caused by the unexpected change of exchange rate affecting the production and sales quantity, price and cost of an enterprise, which leads to the decrease of income or cash flow of an enterprise in a certain period in the future.
Main measures to resolve exchange rate risk:
(1) Select the appropriate contract currency. In foreign trade, lending and other economic transactions, the choice of currency as the pricing currency is directly related to whether the transaction subject will bear the exchange rate risk. In order to avoid exchange rate risk, enterprises should try to use their own currency as contract currency, use hard currency when exporting products and capital, and use soft currency when importing and importing capital. At the same time, measures such as hedging clauses are added to the contract.
(2) Hedging through financial markets. The main methods are cash transaction, futures transaction, forward transaction, option transaction, loan investment, interest rate-currency swap, foreign currency bill discount and so on.
(3) The conversion risk of economic entities in the process of balance sheet accounting treatment is generally resolved by implementing balance sheet hedging. This method requires that the insured assets expressed in various functional currencies on the balance sheet are equal to the insured liabilities, so that the converted risk position is zero. Only in this way, exchange rate changes will not bring translation losses.
(4) diversification. In other words, its sales, origin and source of raw materials are scattered internationally. Through the diversification of international operations, when the exchange rate changes, the management department can increase the production of branches that are beneficial to the exchange rate change and reduce the production of branches that are unfavorable to the exchange rate change by comparing the changes in production, sales and costs in different regions.
(5) Financial diversification. That is to say, in multiple financial markets, seeking the source and destination of funds in multiple currencies and implementing diversified financing and investment enable companies to offset most foreign exchange risks when some foreign currencies depreciate and some foreign currencies appreciate, thus achieving the purpose of preventing risks.
What are the types of domestic foreign exchange risks? It mainly includes transaction risk, conversion risk and operational risk.
Trading risk
When an enterprise forms obligations and responsibilities with its counterparty in the form of a contract, and the contract is denominated in non-bookkeeping currency, the transaction risk will arise immediately. Manifestations can include: orders for undelivered goods or services, various forms of accounts receivable and accounts payable, and determined future capital inflows or outflows.
For example, a China company signed an export contract with an American company denominated in US dollars. China enterprises will face exchange rate risks from signing US dollar orders to receiving payment, especially under the current trend of RMB appreciation and US dollar depreciation.
Report conversion risk
According to accounting procedures, companies must prepare consolidated accounting statements at the end of each fiscal year. If there are companies overseas, they may have to bear the translation risk. The domestic parent company restates the foreign currency financial statements of overseas subsidiaries in the functional currency of the parent company, and then prepares consolidated financial statements. Changes in the conversion exchange rate may increase or decrease the net value or net profit of the parent company.
operating risk
Operational risk refers to the fact that the domestic currency value of the company's non-contractual cash flow may change due to unexpected real exchange rate changes, thus affecting the overall value of the company. The extent to which a company bears operational risks is a measure of the impact of changes in the real exchange rate on the overall value of the company. Operating risk is mainly caused by the relative changes of economic factors between the two countries, which will affect the competitive situation of the company in the international market, so operating risk is also called competitive risk.
Investment speculators in foreign exchange market often talk about how to make money in the foreign exchange market. However, from another perspective, we regard the fluctuation of the global foreign exchange market as a risk. No matter individuals involved in foreign exchange transactions, banks and enterprises, as long as there is foreign exchange, there is foreign exchange risk. Generally speaking, people call "the loss suffered by exchange rate changes and the possibility of losing expected returns" foreign exchange risk. Usually, the amount of foreign currency that bears foreign exchange risks is also called "insured portion".
Since 1973 implemented the floating exchange rate system, the currency exchange rate has fluctuated frequently, not only with a large amplitude, but also the strength and status of various major currencies have often changed. Before the reform and opening up in China, due to strict foreign exchange management and rigid exchange rate adjustment mechanism, most foreign-related enterprises did not really become the main body responsible for their own profits and losses, and foreign exchange risks were mainly borne by the state. With the reform of China's foreign exchange system and China's entry into WTO, banks and enterprises can no longer rely on the protection of * * *. Therefore, how to prevent foreign exchange risks has become a top priority for banks, enterprises and individuals.
One of the manifestations of foreign exchange risk is: foreign exchange transaction risk. Foreign exchange risk is caused by the exchange of domestic currency and foreign currency. The risks that foreign exchange banks undertake in foreign exchange transactions are mainly foreign exchange risks. The same risk will occur when enterprises other than banks make loans or borrowings in foreign currencies and conduct foreign exchange transactions with foreign currency loans and borrowings. Individuals buying and selling foreign exchange also have risks.
The second manifestation of foreign exchange risk is that the exchange of domestic currency for foreign currency for future foreign exchange transactions is risky because the applicable exchange rate for future transactions is not determined. This is the risk that occurs when general enterprises conduct trade transactions and non-trade transactions in foreign currency, so it is also called "transaction settlement risk".
The third manifestation of foreign exchange risk is: how to evaluate foreign currency when enterprises conduct accounting treatment and make final accounts of foreign currency claims and debts. For example, when handling final accounts and evaluating creditor's rights and debts, there will be differences in book gains and losses due to different exchange rates, so it is also called "risk assessment" or "foreign exchange translation risk".
The fourth manifestation of foreign exchange risk is: economic risk-refers to the risk that the expected future income of an enterprise or individual may suffer losses due to exchange rate changes.
The fifth manifestation of foreign exchange risk is: national risk-that is, political risk. Refers to the possibility of losses caused by the termination of foreign exchange transactions by enterprises or individuals due to national compulsion.
Take foreign exchange risk as an example to illustrate foreign exchange risk case 7: Baifuqin bankruptcy case.
Baifuqin Investment Holding Co., Ltd. was established at the end of 1988, and was co-founded by Du Huilian, chairman of the group, and Liang, director and general manager. In just a few years, its business has spread all over the Asia-Pacific region. The Group mainly provides customers with various comprehensive investment banking and securities brokerage services. Baifuqin has developed from an initial capital of HK$ 300 million to a multinational investment bank with total assets of HK$ 24 billion. It has 28 branches in Southeast Asia, Europe and America, covering securities, futures brokerage, fund management, investment and financing, underwriting and listing, etc.
1997 in the second half of the year, the global financial storm broke out. In this financial crisis, the exchange rates of Thai baht, Philippine peso, Malaysian git, Indonesian rupiah and Singapore dollar fell sharply against the US dollar, hitting record lows. Because Baifuqin invested heavily in the Southeast Asian market and held a large number of Asian currency claims, the Southeast Asian currency crash caused irreparable losses to it.
At the same time, the turmoil in the foreign exchange market has also brought about a sharp decline in the stock market. 1October 23rd 1 1700, the Hang Seng Index plunged from 1 10426, with a decrease of 10.4%. 1October 24th 10, the Hang Seng Index rebounded slightly, but1October 28th 1438, the Hang Seng Index plunged again, setting a historical record and closing at 9059. 1October 20-28 10, the Hang Seng Index fell by 454 1 point, or 33.4%. Based on the market value of Hong Kong stocks of US$ 300 billion on July 3rd, it has lost about US$140 billion by October 28th. As a securities business, the stock loss of Baifuqin from July 1997 to July 10 is estimated to be at least close to1000 million Hong Kong dollars.
1998 65438+1October 12 At 5 pm, Baifuqin declared bankruptcy.
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Case study topic: In 20×7 years, 65438+ 10, China Group signed an export order of 10,000 USD with an American company. At that time, the exchange rate of USD/RMB was 7.20. By the time of delivery half a year later, the RMB had greatly appreciated, and the exchange rate of USD/RMB was 7.00. Due to the change of RMB exchange rate, the company lost RMB 2 million.
After this incident, in order to strengthen foreign exchange risk management and effectively improve the company's foreign exchange risk prevention level, the company held a high-level meeting on strengthening foreign exchange risk management in March 20×7, summed up the experience and lessons of this loss, and formulated the company's foreign exchange risk management countermeasures. The main points of relevant personnel's speeches are as follows:
General Manager Chen Mou: Let me make two comments first: (1) It is very important to strengthen foreign exchange risk management, and we must attach great importance to it. (2) Foreign exchange risk management should focus on the key points, especially the management of transaction risk and conversion risk, and practical measures must be formulated to prevent exchange rate changes from eroding the company's profits.
Wu Mou, Executive Deputy General Manager: I totally agree with the general manager. Under the background of relatively stable RMB exchange rate, as long as the production is done well and the orders are completed, the profits will not be realized. However, the formation mechanism of RMB exchange rate in China has changed, and we can no longer stick to the previous management methods and ignore exchange rate risks. We must take necessary measures to protect the value of all foreign exchange assets and liabilities. In addition, the general manager's views on strengthening translation risk management are also very important. The overseas subsidiaries we have established will be put into operation soon, and necessary measures should be taken to hedge the translation risk and avoid book losses.
Chief Accountant Li: It is really important to strengthen foreign exchange management. Recently, I have made a preliminary study on the related issues of foreign exchange risk management, and found that there are still many financial tools for foreign exchange risk management. When any financial instrument is used for hedging, it will also lose the benefits brought by favorable exchange rate changes. The losses and gains of foreign exchange mainly depend on the time and extent of exchange rate changes. Therefore, to strengthen foreign exchange risk management, we should first pay attention to the study of exchange rate trends and take different countermeasures according to different exchange rate trends.
Chairman Zhang: I agree with all the above statements. Finally, two suggestions are made: (1) ideological understanding should be in place. Since July 2, 2005, China began to implement a managed floating exchange rate system based on market supply and demand and with reference to a basket of currencies. The RMB exchange rate is no longer pegged to a single dollar, forming a more flexible RMB exchange rate mechanism. In this macro situation, it is necessary to take measures to strengthen foreign exchange risk management. (2) It is suggested that the Finance Department set up a foreign exchange risk management team, headed by the manager of the Finance Department, to be responsible for the daily work of foreign exchange risk management.
Requirements:
(1) Does the exchange rate given in the title adopt direct quotation method or indirect pricing method?
(2) What risks do the examples in the title reflect?
(3) From the basic principles of foreign exchange risk management, what are the improper speeches made by the General Manager, the Executive Deputy General Manager, Chief Accountant Li and the Chairman? And briefly explain the reasons respectively.
Analysis hint
(1) Direct quotation
(2) Transaction risk
(3)
—— General Manager Chen Mou:
The viewpoint on the main points of foreign exchange risk management is inappropriate.
Reason: For an enterprise, economic risk is more important than conversion risk and transaction risk, because its impact is long-term, while the impact of conversion risk and transaction risk is one-off.
—— Executive Deputy General Manager Wu Mou:
(1) It is not appropriate to adopt hedging measures for all foreign exchange assets and liabilities.
Reason: Foreign exchange assets and liabilities may increase or decrease in value due to exchange rate changes, which may naturally offset, so it is not necessary to take hedging measures for all foreign exchange assets and liabilities.
(2) Not suitable for hedging translation risks.
Reason: reducing translation risk may increase transaction risk at the same time. Therefore, if the conversion risk does not affect cash flow, there is no need to hedge the conversion risk.
-Chief Accountant Li:
(1) The view that "taking any financial instrument to hedge risks will also lose the benefits brought by the favorable exchange rate changes" is inappropriate.
Reason: Financial instruments such as forward foreign exchange trading and foreign exchange futures are used for hedging. By locking the exchange rate, we can avoid the losses caused by unfavorable exchange rate changes, but at the same time we will also lose the benefits brought by favorable exchange rate changes. Financial instruments with foreign exchange options can avoid the losses caused by unfavorable exchange rate changes and enjoy the benefits brought by favorable exchange rate changes.
(2) The view that "the gains and losses of foreign exchange mainly depend on the time and range of exchange rate changes" is inappropriate.
Reason: The gain and loss of foreign exchange depends on three factors: (1) foreign exchange exposure affected by exchange rate changes; (2) the impact of exchange rate changes on foreign exchange assets and liabilities; (3) Time and extent of exchange rate changes.
—— Chairman Zhang:
It is not advisable to suggest that the finance department set up a foreign exchange risk management team, with the manager of the finance department as the team leader, responsible for the daily work of foreign exchange risk management.
Reason: Foreign exchange risk includes economic risk, transaction risk and conversion risk, among which economic risk involves all aspects of production, sales, raw material supply, location and other management. Therefore, the management of economic risks has gone beyond the responsibilities of the financial department, but needs the cooperation of all departments and Qi Xin to achieve the purpose of managing economic risks by adjusting business strategies and adopting internal management methods.
What are the risks of foreign exchange risk? Foreign exchange rate is influenced by many factors and unpredictable. Customers may make a profit or lose money when conducting firm foreign exchange transactions, depending on whether the customer's judgment on the market is accurate or not.
The above information was answered by Parkway Australia.
What does "foreign exchange risk" mean? How to measure and confirm the "foreign exchange risk" The risk of the foreign exchange industry is enormous. As for how much an individual has to bear, it depends on how you plan your own investment. There are two ways to do foreign exchange: one is to make your own bill, and the risk is entirely borne by the individual. The profit and loss of the account also depends on the individual's operation. Second, valet trading Although this kind of service, in a sense, has not been recognized by national laws, there are still many people doing this kind of business among the people. Generally speaking, if a good trading team can be found, customers may have to bear the risks agreed in the contract.
Is it risky to do foreign exchange? The risk is high and the return is high, and the risk is directly proportional to the return. But when it comes to foreign exchange, if you are optimistic about the market, you can control the stop loss and avoid the risk.
Let's exchange experiences sometime.