Hedging foreign exchange risk: How does it work in practice?

This article presents a brief discussion of the motives for hedging strategic exposure and relates the theoretical work to a practical situation. The theory suggests that strategic exposure management can have a favourable impact on the firm's value. In practice, firms may pursue a limited number of hedging motives and the organisational arrangements within firms can have important impacts on the extent to which specified hedging motives can be pursued. © 1999 Elsevier Science Ltd. All rights reserved.