Case Summary :Managing Foreign Currency Exposure at 3M

The closing case explores the implications of changing currency values at 3M. With about 60 percent of its annual revenues coming from outside the United States, 3M is especially vulnerable to fluctuations in exchange rates. Indeed, 3M believes that adverse currency movements cost the company some $42 million in pretax profits in 2018, and $11 million in 2017. 3M uses various strategies to reduce its exchange rate risk including forward contracts and foreign currency debt.

1-a) If the dollar depreciates in value against most other countries over the next year, what will the impact be on 3M?

1-b) Should3M hedge against adverse movements on foreign exchange rates? How should it do this?