MNCs can reduce their exchange rate expense

Question

Quizplus · Accepted Answer

All three options (bilateral netting, centralized cash management system, and multilateral netting) can help MNCs reduce their exchange rate expense.

Bilateral netting involves offsetting payable and receivable transactions between two parties in the same currency, reducing the need for foreign exchange transactions and minimizing exchange rate risk.

A centralized cash management system consolidates cash resources and currency exposures into a single unit, enabling MNCs to more efficiently manage their foreign currency exposure.

Multilateral netting involves offsetting transactions between three or more parties in different currencies, reducing the need for foreign exchange transactions and minimizing currency risks.

MNCs Can Reduce Their Exchange Rate Expense