Answer to Question #184920 in Management for Puja

Question

1.      Do you think BusBoard would benefit from hedging foreign exchange risk in today’s uncertain times due to Covid-19 pandemic? Clearly explain the potential benefits and costs.

 

2.      Patti Kornak – BusBoard’s General Manager – is an example of a female corpoerate leader. Do you believe that gender diversity in corporate leadership is consistent with the goal of maximizing shareholder wealth? Why/why not?

 

3.      There is a growing trend in the fight against racial inequality in the business world. Do you believe that corporations should continue to challenge the systemic barriers to opportunity and dignity that exist for communities of color?

 

a.      Give a reason that can support this argument.

Give a reason that opposes this argument.

Answer 1

BusBoard Management

Currency hedging is a strategy used in reducing the risks associated with foreign investments. As people can heavily invest in foreign currencies, they can use hedging as a method of shielding the money put in very risky Forex market. In today’s uncertain COVID-19 pandemic, a company like BusBoard can benefit from hedging foreign exchange risk and also face some costs.

Benefits of Hedging Foreign Exchange

• This investment approach will guarantee the protection of BusBoard importers and exporters against exchange rate changes.
• It will enable importers and exporters to overcome the difficult times of economy crisis and also enable them take long positions in the forward contracts therefore eliminating risks.
• It will help provide BusBoard with the opportunity to lock their profits and earn long-term gains.

Potential Costs

• The process of hedging is costly as the investment cannot be done at zero costs thus will significantly impact financials.
• Hedge accounting involving foreign currency business transactions is usually limited to inter-company transactions and the earnings ca impact consolidation.     

Gender Diversity

Gender diversity in corporate leadership is not consistent with the goal of maximizing shareholder wealth. An explanation for this is that companies do not perform worse after appointing female directors and neither are they more or less profitable. Consequently, I believe that women should be appointed to leadership roles for gender equality reasons but not because gender diversity leads to company performance improvements.

Fight against Racial Inequality

Corporations should continue challenging the systemic barriers to opportunity and dignity that exist for communities of color. Improving ethnic and racial diversity is important in challenging the worldview and values of current employees and is necessary for companies aiming to develop more inclusive corporate culture.

However, efforts to fighting against racial inequality in the business world have disappointed even with the growing trend. This disappointment is because the policies meant to enhance the fight against inequality have become the basis for evaluating minority members an ways far beyond the originally targeted role.