Which one of the following is the suggested method of handling exchange rate risk for a large, multinational firm headquartered in the U.S.? Assume the operations in each country represent a different division of the firm.

Question

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The best choice for a large, multinational firm headquartered in the U.S. would be to handle exchange rate risk on a centralized basis for all divisions. This approach would allow for a more coordinated and efficient management of currency risk across all the company's operations, as opposed to a fragmented approach at the division level, or by grouping divisions based on geographical continents or currencies. Segregating U.S. and foreign operations may not be practical for many companies, and would also miss the opportunity to leverage global risk management strategies. Therefore, a centralized approach would allow the company to better manage its overall currency risk exposure, and maximize its ability to respond to changing market conditions.

Which One of the Following Is the Suggested Method of Handling