Management of Transaction Exposure: A Comparative Analysis of MNCs in India

In an era of globalization, thousands of transactions of international trade take place among companies of different countries. But the profitability of these transactions can be completely wiped out by adverse movements in the exchange rate during this time gap. Transaction exposure is a measure of effect of exchange rate fluctuations on these transactions. Unmanaged transaction exposure can paralyze not only financial position but also competitive position of companies in market. The present study portrays transaction exposure management as practiced by various multinational companies in India. And compares management of transaction exposure by banking and non-banking and foreign and Indian MNCs. The effect of various factors on their management policy is also investigated. The results of the study evidence that the majority of firms make efforts to measure their transaction exposure. There is no significant effect of level of transaction exposure on estimation policy and decision to develop separate management system for management of transaction exposure of companies. Significant difference exists between management policies of companies of different sectors toward management of their transaction exposure. Companies are actively using various hedging strategies for managing their transaction exposure.