Case Study On Avoidance Of Exchange Rate Risk Of Dalian Chemphy Chemical Co., Ltd.

In this case, Avoidance of exchange rate risk of Dalian Chemphy Chemical Co., Ltd. (Abbreviated as 'Chemphy' hereinafter) is studied. Since RMB appreciated in July of 2005, Chinese companies have been facing exchange rate risk, which also had huge impact on Chemphy, a chemical company with exporting as the major business. As RMB appreciates further, Chemphy is taking more and more risk and economic loss from appreciation of RMB, which has badly reduced the profit and competitive strength of the company. Therefore, the purpose of the case study is to establish an operating program to avoid exchange rate risk, and to improve management of exchange rate risk of Chemphy, and finally to avoid further economic loss and negative effect from exchange rate risk in the future.This study focuses on the major risks that Chemphy is facing, that are transaction exposure and economic exposure. In the study, I firstly studied the relative theory and methods to avoid exchange rate risk, and then analyzed the problems in management of exchange rate risk of Chemphy and the feasibility of all the methods to be used for Chemphy mentioned in the literatures. Based on the study and analysis, some methods which are suitable for Chemphy were chose to design the program. By modification and combination of these methods, a programs was designed to avoid the exchange rate risk of Chemphy.After design of the program, I made efficiency analysis to this program. The conclusion is that this program is feasible and efficient to solve the problems in the management of exchange rate risk of Chemphy. Then the program was practiced in the management of Chemphy and in the concrete exporting and importing business. Practice of these two programs also showed that its efficiency is fairly high.Through study of this case, the problems in management of exchange rate risk of Chemphy were solved in a very large degree, and the loss from exchange rate risk is reduced. At the same times, competitive capacity and profit of Chemphy is improved by it. In addition, study of this case also improved my capability of learning, analysis and solving problems. What is more important to myself is that the knowledge that I learned from MBA class is used to guide practice of my work.