Analyze the risk management of the company
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Analyze the risk management of the company
Transcribed Image Text:Risk management approaches or policies adopted by BMW
Some of the risk strategies adopted by BMW include:
A. Setting up regional treasury centres in different countries like
the U.S
B. BMW minimised the foreign exchange risk by using the
natural hedge approach. This involves spending money where
the sales took place, that is, concentrating production in areas
with the highest sales. To accomplish this, BMW moved
production to the geographic areas where their sales were the
most robust. At the same time, BMW shifted their purchasing
practices. Instead of using international suppliers, the company
aimed to purchase locally. This reduced the number of times
that currency exchange was required to conduct business. In
other words, BMW's natural hedging strategy was to produce,
sell, and buy in the same geographic region using the local
currency.
C. Bmw has minimised the global and political risk by using cash
flow risk approach method
D. The company minimises the sustainability risk by carrying out
sustainability questionnaire surveys, and sustainability audits
E. BMW is reducing the risk of the company taking
responsibility should accidents occur by carrying out regular
maintenance including security tests on computer software.
F. The company applies the risk avoidance approach and it does
this by avoiding events that might be sources of risk. For
instance; BMW produces and sells where it produces to avoid
the foreign exchange risk
G. BMW uses the risk transfer strategy. It does this by selling cars
to individuals with high disposable income at a price including
production costs and fixed costs, while to those with less, a
price including production costs and variable costs.
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