Analysis of Currency Risk Hedging Strategies in Multinational Companies: A Case Study of the 2022 Russo-Ukrainian War and Surge in US Dollar Exchange Rate

Abstract

The volatility of exchange rates due to frequent global events is one of today’s hot topics. The profitability of large multinational corporations is highly correlated with exchange rates. This paper primarily takes a case study approach, focusing on the combination of global events and large multinational corporations, integrated with the strategic optimization of commodity swaps. The ultimate goal is to develop innovative strategies for large multinational corporations to hedge against foreign exchange risk. The first case of the article focuses on the analysis of the Russian Ruble exchange rate, which first fell and then rose from February to August 2022, and Coca-Cola HBC modifies cash and debt to account for foreign exchange swings. The second case assesses the financial impact of a spike in the U.S. dollar exchange rate in 2022, where Coca-Cola reduces its assets in financial derivatives designated as hedges and significantly increases its liabilities to offset them. In addition, the study also presents a novel strategy that mixes forward foreign currency contracts with commodity futures. Reduce risk by securing profits ahead of time. This comprehensive analysis aims to provide companies with insightful and actionable strategies for managing the complexity and uncertainty of currency market volatility.