Research On Fuyao Group’s Foreign Exchange Risk Hedging Strategy And Effect

With the development of the "going global" strategy,Chinese outward foreign direct investment has also shown a trend of rapid growth.Domestic multinational enterprises continue to expand their overseas markets through the external sales of products and services and the establishment of overseas subsidiaries.The "811" exchange rate reform has changed the previous trend of unilateral appreciation of RMB exchange rate,and after 2017,the RMB exchange rate shows a two-way fluctuation trend,which has led to greater foreign exchange risks for multinational enterprises.So it is very important for Chinese multinational enterprises to manage foreign exchange risk effectively.This paper selects Fuyao Group as the object of study,first,it briefly introduces its main business and globalization,,cost structure,currency exchange rates and foreign exchange risk management organization.After analyzing the types of foreign exchange risks,it is found that Fuyao Group faces greater transaction risks,translation risks and economic risks through relevant data.In order to reduce the impact of foreign exchange risks on the company,Fuyao Group has taken corresponding measures,including financial hedging by buying and selling foreign exchange derivatives such as forward foreign exchange contracts,and operational hedging by developing a global sales network and building overseas production bases.It is shown that the use of foreign exchange derivatives has brought positive benefits to enterprises,and has a good hedging effect on the exchange losses of enterprises.The construction of the global sales network strengthens the degree of cooperation between enterprises and customers,enriches the monetary funds held by the enterprise,and enables it to have a certain natural hedge against exchange rate fluctuations.Establishing production bases in Russia and the United States allows companies to take advantage of local energy advantages through capacity allocation,reducing production costs and the impact of exchange rate fluctuations on sales and freight,and improving the profitability and operational capability.Using cash flow volatility and stock price return models to analyze its effect of foreign exchange risk hedging.The results show that Fuyao Group’s foreign exchange risk hedging has achieved good results.The fluctuation of the US dollar exchange rate and the establishment of production bases in Russia and the United States have no significant impact on the company’s cash flow volatility and stock price return.The use of derivatives hedges the impact of the European exchange rate change,but changes in the exchange rate of the European still have a certain impact on the cash flow and stock price of the company,and the fluctuation of the RMB effective index has an impact on the monthly return on the stock price of the company.Finally,we suggest the hedging of foreign exchange risk for Fuyao Group from the specific operation level and corporate strategy level: strengthen the management of the European exchange rate;enrich the types of financial instruments;introduce professional talents and improve the risk management structure.