GHJ makes large export sales to customers in Country A, whose currency fluctuates significantly against GHJ’s home currency. GHJ also makes large purchases from suppliers in Country A. All of these transactions are in Country A’s currency.
GHJ’s Treasurer does not actively hedge currency risks because there is a natural hedge in place due to the company making both sales and purchases in the same currency.
GHJ’s Board has instructed the Treasurer to put active hedging measures in place because the Risk Report would otherwise have to disclose the fact that GHJ has a currency risk which is not actively hedged.
Which of the following statements are correct?
A. The Board may be concerned it will be criticised if it does not hedge.
B. Risk reports can change behaviour.
C. The Board does not want to be blamed for ignoring a risk.
D. Risk reporting is a bad thing.
E. Risk reporting drives the whole risk management process.
Answer: A,B,C
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