Any thoughts on today's paper. I reckon that the paper was mind boggling and the questions were open to a lot of interpretaion. Not sure what was supposed to be written without much of supporting content & data in pre-seen and un-seen. The
How did people find Q1 A. Identifying risks. There were a lot of risks, i thought it was better to classify them under 5 categories and then write. i classified them under
financial: exchange rate/inflation etc
business: control risk with information systems, fraud etc...
reputational: related to disposal of toxic wastes.
political: related to african country's rigid policies with respect to foreign investment, exchange controls, transfer pricing etc
I evaluated the risks by drawing a likelihood/impact matrix.
Am confused now if it was the right way to classify risks under 5 headings?
what did people right on mitigating forex risks?
matching? leading lagging? invoice in home currency, use derivatives. Am not sure what would have been the accounting implications except for derivatives which have to be reflected at fair market value in the fin. statements.
Doubts on Q3
was the forward contract beneficial? in my case it was since the actual rate in 3 months time was higher than the forward rate and the company would have received more pounds. thoughts ?