Case Study Of The Impact Of Foreign Exchange Risk Management On Gree Electric's Financial Performance

In the 21 st century,China's exchange rate has undergone important reforms at two points in time.In 2005,China began to implement a managed floating exchange rate system,and the volatility of the RMB exchange rate became more market-oriented.On August 11,2015,the central bank further improved the RMB exchange rate system,and the RMB exchange rate formation mechanism became the quotation mechanism of the RMB-to-US dollar exchange rate in the “closing exchange rate + a basket of currency exchange rate changes”.After the "8.11 exchange rate reform",the renminbi ended the long-term trend of unilateral appreciation of the US dollar since 2005,and the trend of two-way volatility gradually became apparent.Against the background of more volatile,volatile and frequent fluctuations in the RMB exchange rate,there are a large number of overseas sales and foreign affiliates,and the possibility of exchange rate fluctuations is increasing.This requires enterprises to use foreign exchange risk management tools to strengthen the awareness of foreign exchange risk management,pay attention to the changes in the foreign exchange market,strengthen their ability to resist foreign exchange risks,and reduce the losses caused by exchange rate fluctuations as much as possible.This paper selects GREE Electric,the largest home appliance sales enterprise in China,as the research object,and analyzes the overall foreign exchange risk management of GREE Electric Appliance.The reason why GREE Electric was chosen as the research object,first of all,because GREE Electric's "going out" strategy has brought greater foreign exchange risk to the company in recent years,exchange rate fluctuations have increased the possibility of losses,especially the company's exchange losses.In recent years,the change has been large,causing internal and external attention to the company's foreign exchange risk management capabilities.Secondly,because GREE is a leading enterprise in the home appliance industry,from a single obscurity,there is only one simple,annual output of 20,000 windows.The small-scale production line of air-conditioners has grown into a multi-national multinational company with global operations.Its development model and overseas expansion strategy are highly representative in Chinese enterprises,and with the acceleration of its global layout,how can GREE further The foreign exchange risk of management and daily drama is also of concern to other companies.This paper on China's exchange rate system,RMB exchange rate movements and the influence factors of the exchange rate volatility to understand,then introduces the basic situation and the operating conditions of GREE electric appliances,and from the company's management structure and specific accounting methods and two aspects of internal control system for the company's foreign exchange risk management status are introduced.After that,the source of foreign exchange risk of GREE electric appliances was analyzed,and the overall foreign exchange risk management effect of the company was specifically analyzed from the perspective of financial hedging and operational hedging,and the empirical effect of the company's foreign exchange risk management was measured by stata15 analysis tool.Analysis and measurement,according to the results of GREE electric appliances as a collection of r &d,production,sales and service in the integration of international home appliance enterprises,with an expanding company,overseas sales in recent years,the foreign exchange risk management makes foreign exchange exposure does not increase,management effect is good,and in the context of the exchange rate fluctuations are more frequent,the company in recent years are also constantly improve their ability to guard against foreign exchange risk,foreign exchange risk management and a good effect,but the company's existing foreign exchange risk management there are still some shortcomings.Finally,this paper puts forward some feasible Suggestions for the improvement of GREE electric appliances' foreign exchange risk management in the future,which will help GREE electric appliances' foreign exchange risk management system and enhance its ability of foreign exchange risk management.At the same time,it also provides certain reference for more and more "going out" Chinese enterprises to conduct foreign exchange risk management.