Global supply chains are exposed to risk from many sources. Foreign exchange (FX) fluctuations among currencies is one source of risk many firms are exposed to, which can pose significant financial losses for organizations in their global supply chains. Finance is frequently tasked as the business function responsible for creating financial strategies for hedging this form of risk. However, from a supply chain finance perspective, we argue firms should consider an array of approaches utilizing cross-functional teams, including supplier and customer participants, in creating a holistic strategy and range of approaches for mitigating FX risk exposure. The purpose of this paper is to create a framework for examining how firms can create a holistic strategy for mitigating the detrimental effects of FX risk within their firms and supply chains. In particular, the focus of the paper is the integration of financial and supply chain management approaches for mitigating FX risk exposure from a cross-functional, interorganizational perspective. Through a literature review and theory development, we argue business functions including logistics, finance, marketing, supply management, operations and legal, as well as customers and suppliers, can serve critical roles in helping organizations develop and utilize financing, contracting, and operating strategies as part of an overall FX risk mitigation approach.

Integrating Financial and Supply Chain Strategies for Mitigating Foreign Exchange Risk

GAUDENZI, Barbara
2017-01-01

Abstract

Global supply chains are exposed to risk from many sources. Foreign exchange (FX) fluctuations among currencies is one source of risk many firms are exposed to, which can pose significant financial losses for organizations in their global supply chains. Finance is frequently tasked as the business function responsible for creating financial strategies for hedging this form of risk. However, from a supply chain finance perspective, we argue firms should consider an array of approaches utilizing cross-functional teams, including supplier and customer participants, in creating a holistic strategy and range of approaches for mitigating FX risk exposure. The purpose of this paper is to create a framework for examining how firms can create a holistic strategy for mitigating the detrimental effects of FX risk within their firms and supply chains. In particular, the focus of the paper is the integration of financial and supply chain management approaches for mitigating FX risk exposure from a cross-functional, interorganizational perspective. Through a literature review and theory development, we argue business functions including logistics, finance, marketing, supply management, operations and legal, as well as customers and suppliers, can serve critical roles in helping organizations develop and utilize financing, contracting, and operating strategies as part of an overall FX risk mitigation approach.
2017
supply chain risk, commodity price risk, foreign exchange risk, supply chain management
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11562/967999
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