Research On Exchange Rate Risk Management Strategy Of XG Machinery

In the management of enterprises,exchange rate fluctuation has become one of the main risks they face.On August 11,2015,the central bank launched a new policy aiming at "improving the quotation of the RMB-US dollar exchange rate intermediate price".A new round of reform of RMB exchange rate formation mechanism is under way.The exchange rate has changed from a continuous appreciation to a staged depreciation.Since 2017,trade frictions between China and the United States have occurred from time to time.Trade protectionism and de-globalization have been on the rise,and exchange rate fluctuations have further expanded.After nearly five years of downturn,China's construction machinery enterprises have bottomed out in the promotion of “The Belt and Road Initiative”,and the prospects for the industry have improved,and the volume of import and export trade has increased dramatically.Exchange rate fluctuation has a more significant impact on the production and operation of enterprises.China's construction machinery enterprises should pay attention to exchange rate risk management,avoiding the negative impact of exchange rate fluctuation on enterprises.This paper reviews the research on exchange rate risk management by domestic scholars.It mainly describes the classification,steps and effects of exchange rate risk management.In the effect of exchange rate risk management,the focus is on the effect of different types of strategies.This paper chooses XG Machinery as a case enterprise.Firstly,it explores the source of exchange rate risk of XG Machinery from three aspects: transaction risk,conversion risk and economic risk,and identifies its risk qualitatively.It also analyses the exchange rate risk management strategy adopted by the enterprise and uses cash flow model to empirically analyze the effect of exchange rate risk management strategy adopted by XG Machinery.The research shows that XG Machinery is facing a large exchange rate risk,and the transaction risk and conversion risk have a significant impact on the total profit of the enterprise.XG Machinery's multinational diversification strategy effectively controls the economic risks caused by exchange rate fluctuations,but for the transaction risk and conversion risk,the management strategy of enterprises is insufficient.In this regard,improvement measures are put forward from two aspects: operational hedging strategy and financial hedging strategy.Operational hedging strategy is mainly aimed at mitigating the economic risks caused by exchange rate fluctuations.It is suggested that enterprises strengthen risk awareness and establish organizational structure;introduce professional talents and establish incentive mechanism;improve negotiation ability and flexible currency selection;and make good use of contract barriers and add preservation clauses.Financial hedging strategy mainly hedges the transaction risk and conversion risk caused by exchange rate fluctuation.It is suggested that enterprises make full use of Forfaiting business,rationally use foreign exchange derivatives,and strengthen the management of foreign currency debt of enterprises.