Oreign Exchange Risk Analysis Exporting Nike Footwear, Apparel and Equipment to China

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Foreign Exchange Risk Analysis
Exporting Nike Footwear, Apparel and Equipment to China

1) Financial considerations
Foreign government (Chinese) actions/policies
Exposure to foreign currency payments/receipts
Percent/real money lost/gained over time (quarterly/annually)
Due to differences in exchange rates
Favorable lending practices
In support of establishing/expanding operations
Determine what countries/financial institutions are preferred
In addition to lending in China
Plan to eventually exchange yuan to dollars or leave in local currency to fund Chinese ops
Currency exchange  payback period
Strategy of duration of holding funds before exchanging
Manufacturing facilities
Production capability expansion in Vietnam for import to China
China production for domestic use
Discuss how appropriate action in this section translates to shareholder value

2) Assess risks
Apply economic concepts with supporting statistical analysis of historical data
Exchange rate
Trend analysis data with overall loss/gain
Trend direction can the firm expect this number to remain the same?
Consequences of trend
If rise/fall, what happens to business concept/bottom line
Forecast of future (1, 2, 3, 4 and 5 years) exchange rate behavior
Offer assumptions forecast based on and likelihood of forecast accuracy
Political risks associated with production in Vietnam/China

3) Describe
Data, sources, methodology, results
Narrative describing source data, logic, thought processes and assumptions
describe business model/economic assumptions

4) Develop hedging strategies
Based on Nike current strategy
Utilize Nike 2006 annual report as reference
Strategy should favor China operations and be in keeping with global efforts
Compare/contrast hedging with production focus on Vietnam/China
Discuss how appropriate hedging strategy translates to shareholder value

5) Recommendations
Based on finding in previous sections
Mitigation strategy for Nike
Minimize risks associated with foreign exchange
Create favorable conditions for importing products to China