INT 620 Milestone Two Guidelines and Rubric You will submit your Foreign Exchange Risk Management Analysis. Your analysis should include foreign exchange risk net exposure and the tools or techniques your chosen company currently uses to mitigate the risk. In Milestone Two, you will also analyze the company’s hedging characteristics and other potential risks that might arise from this imperfect hedge. Specifically, the following critical elements must be addressed: Foreign Exchange Risk Management Analysis: Analyze the firm’s transactions, its foreign exchange rate risk exposure, and the tools the firm currently uses to mitigate the risk. a) Explain the firm’s specific transactions, which are the accounts payable and accounts receivable, and how these transactions expose the firm to foreign exchange rate risk. Some firms could be exposed to both of the accounts because they import raw materials from foreign countries, add value to the product, and then re-export the product to other foreign countries. However, the net exposure must be only one account. b) Identify the tools the firm currently uses in mitigating the foreign exchange rate risk. Occasionally, firms utilize more than one tool to hedge the risk. Some examples are using foreign debt to hedge the foreign income, or using derivatives such as currency swaps, futures, forwards, or options. c) However, most of the time, the company does not fully hedge its exposure to the foreign currency. You must explain the percentage hedge of its exposure as well as the hedging time. Then, you must provide the potential risk to which the company could still be exposed from the foreign exchange rate. Guidelines for Submission: Milestone Two must be submitted as a two- to three-page Microsoft Word document with double spacing, 12-point Times New Roman font, and one-inch margins; use at least three scholarly sources; and be cited in APA format. Instructor Feedback: This activity uses an integrated rubric in Blackboard. Students can view instructor feedback in the Grade Center. For more information, review these instructions. Critical Elements Proficient (100%) Needs Improvement (70%) Not Evident (0%) Value Foreign Exchange Risk Management Analysis Analyzes the firm’s specific transactions: accounts payable and accounts receivable, and how these transactions expose the firm to foreign exchange rate risk by providing evidence of each transaction Analyzes the firm’s specific transactions and the possible exposure to risk, but does not provide evidence of each transaction Does not analyze the firm’s transactions or possible exposure to risk 30 Foreign Exchange Risk Management Analysis Identifies the tools the firm currently uses in mitigating the foreign exchange rate risk by providing examples Identifies the tools the firm currently uses in mitigating the foreign exchange rate, but does not provide specific examples Does not identify the tools the firm currently uses to mitigate the foreign exchange rate 30 Foreign Exchange Risk Management Analysis Analyzes the percentage hedge of the company’s exposure and the hedging time length by providing specific examples Analyzes the percentage hedge and the hedging time of the company’s exposure, but the submission does not include specific examples Does not analyze the percentage hedge and/or the hedging time of the company’s exposure 30 Articulation of Response Submission has no major errors related to citations, grammar, spelling, syntax, or organization Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas 10 Earned Total 100%