A Singapore-based manufacturing company that exports to a number of overseas countries,often through its subsidiary companies,is investigating alternative 'internal' hedging techniques to manage its foreign exchange risk exposures.All of the following risk management techniques are 'internal' hedging techniques,except:

Question

Quizplus · Accepted Answer

Invoicing in foreign currencies is an 'external' hedging technique as it involves a contractual agreement with the buyer to transact in a foreign currency. The other options, creating a natural hedge, diversification of currencies, and leading and lagging cash flows, are all 'internal' hedging techniques as they involve managing foreign exchange risk exposures through internal operational and financial activities.

A Singapore-Based Manufacturing Company That Exports to a Number of Overseas