Study On Exchange Rate Risk Prevention And Resolution Of Hunan Ruilihang Company Limited

In the tendency of economic globalization,economic and trade exchanges become more frequent among countries.The total import and export volume keeps rising as more and more enterprises are participating in international trade.Because of various crises erupt,the international economic environment is becoming increasingly complex,international trade competition is increasing and the foreign exchange rate fluctuates greatly.The prevention and resolution of foreign exchange rate seems particularly significant for small and medium-sized enterprises.This paper firstly studies on the exchange rate risk in macroscopic view by the guide of exchange rate risk theory,the theory of exchange rate fluctuation affecting trade balance,the transmission mechanism theory of exchange rate fluctuation to international trade and the theory of exchange rate risk prevention.Secondly,after introducing the basic situation and market characteristics of Hunan Ruilihang Company Limited,this paper analyses the exchange rate risk issues of the company.Meanwhile,the current situation of exchange rate risk management of the company is analyzed from four aspects: risk assessment,risk prevention,risk resolution and risk taking.Five factors have been found out which have great influence on the exchange rate risk management of the company,such as policy factors including different policies,market factors,risk awareness factors,business factors and risk tool factors.After fully analyzing the actual situation to prevent exchange rate risk,it proposes that Hunan Ruilihang Company Limited should firstly improve the ability of risk identification to accurately identify the exchange rate risk it faces.At the same time,it should improve the coordination ability of the market,make use of the new overseas warehouses and third-party platforms in the market to balance the exchange rate risk,adjust the product structure and improve proportion of high quality of the profit margin.In risk resolution,the proposal of financial derivatives and trade financing strategies should be based on fully analyze of advantage and disadvantage of the tools and strategies as well as the actual situation of the company’s orders,targeted allocation of financial derivatives and trade financing strategy.Through the studies on the exchange rate risk of Hunan Ruilihang Company Limited,this paper draws the conclusion that risk prevention and resolution is meaningful for the exchange rate risk of the company as it could improve the profitfor the company.By the way,this paper could offer reference to silimar enterprises in related industry for prevention and resolution of exchange rate risk.