Minion is a nutrition company based in the United Kingdom that specialises in manufacturing and exporting...

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Minion is a nutrition company based in the United Kingdom that specialises in manufacturing and exporting high-quality nutrition products to the United States. In addition, the company imports raw materials from various European countries and pays suppliers in euros. Minion has been in the nutrition industry for a long time and has established itself as a market leader. The nutrition industry is a highly competitive and dynamic industry that is constantly changing due to technological advancements and shifting consumer preferences. As a result, in order to remain competitive, the company has had to remain agile and responsive to changing market dynamics. The company has made significant investments in research and development to create innovative products that meet the changing needs of consumers. One of Minion's key success factors has been its ability to export its products to the United States, which is one of the world's largest markets for nutrition products. The company has a robust distribution network in the United States, allowing it to reach a large customer base. Furthermore, the company has been able to maintain competitive pricing for its products. allowing it to gain market share. Minion's international nature has exposed the company to a variety of risks, including foreign exchange rate risk. The company receives payments in dollars from its customers in the United States, but it makes payments to its suppliers in euros. Exchange rate volatility can have a significant impact on the company's profitability. Minion has therefore used hedging strategies to manage its foreign exchange rate risk. The finance team has overseen putting the hedging strategies in place and ensuring that the company's foreign exchange rate risk is adequately managed. However, concerns were raised about the company's foreign exchange rate risk hedging strategy at a recent board meeting. The managing director expressed concern that the company's raw material imports and finished product exports made it vulnerable. The volatility of exchange rates is one of the key challenges Minion faces in managing its foreign exchange rate risk. The ability of the company to forecast exchange rates accurately is critical to its success in managing foreign exchange rate risk. Economic indicators, political developments, and market sentiment all have an impact on exchange rates. As a result. accurately predicting exchange rates is a difficult task that necessitates a great deal of expertise and experience. The international business strategy of Minion is a critical component of their operations. The company will gain access to a variety of materials from various countries at competitive prices, ensuring the company's profitability and competitiveness. The availability of raw materials from various sources also provides Minion with a diverse supplier base, which is important in mitigating risks associated with supplier disruptions or market price changes. Simultaneously. Minion's export-focused business strategy allows them to generate revenue from the lucrative US market. The US market is one of Minion's most important markets, with demand for such products increasing significantly in recent years due to an increase in health-conscious consumers. Minion has a large customer base in the United States. The main concern, however, is currency exchange rate risk. Depending on the direction of the exchange rate movement, fluctuations in the GBP-USD exchange rate can be beneficial or detrimental to the company. These fluctuations can have a significant impact on the company's financial performance and their ability to invest in R&D or expand their operations. Minion's exposure to currency exchange rate fluctuations is complicated further by the fact that they import raw materials from Europe and pay suppliers in Euros. This exposure to multiple currencies complicates their operations because they must manage currency risk across multiple currencies. Minion's management team has identified the need for a robust risk management strategy considering these risks. Further, the company currently has substantial sterling funds on deposit. Minion has faced several operational challenges in recent years. The company's operations have been hampered by several environmental issues, as well as the country's high inflation. high interest rates, and slow economy. High inflation has also impacted on the company's suppliers, who have raised their prices to maintain margins. As a result, the company has had to investigate alternative raw material sources in order to keep its costs low. However, due to the scarcity of high-quality raw materials, this has proven difficult. Minion is also concerned about the country's high interest rates. Because of them, the company has had difficulty obtaining financing to fund its operations. In addition to these challenges, the slowing economy has had an impact on Minion's business. The company's sales have been declining due to weak consumer demand, which has been attributed to the country's slow economic growth. The company has been trying to find new markets for its products, but this has been difficult due to the low demand for nutrition products in the current economic climate. In addition to these economic challenges, the company has had to deal with several environmental issues in its operations. The company has been under pressure to reduce its carbon footprint and minimise the environmental impact of its operations. This has necessitated the company's investment in new technologies and processes in order to reduce emissions and conserve resources. To stay ahead of the competition, the company has been exploring new markets and investing in research and development. Minion has also been working closely with its suppliers to find ways to reduce costs and improve supply chain efficiencies. The company has been looking for ways to cut costs and increase cash flow. To improve its working capital position, the company has been negotiating with its suppliers to reduce prices and extend payment terms. Minion has also investigated new financing options, such as crowdfunding and peer-to-peer lending, in order to obtain funds at lower interest rates. The company has been expanding its product line and entering new markets. The company has been developing new products to meet the needs of various consumers. Receipts of USD5mil from USA customers are due on March 31, 2023. Assume the current date is 30 November 2022. Rates of exchange for Spot USD to GBP: 1.4336-1.4340 & forward rate USD to GBP: 1.4422-1.4430. Currency futures price for March is USD per GBP 1.4410 with a standard contract size of GBP62,500. For over-the-counter currency option, a March put option to sell USD with an exercise price of USD1.4390 per GBP is available. The premium is 3 pence per USD and is payable on November 30, 2023. Annual borrowing and depositing interest rates for the USD are 5.20%-4.80%; and for the GBP, they are 3.30%-3.00%. Assume the spot price on March 31, 2023, is USD 1.4484-1.4490 per GBP and the March futures price is USD 1.4487 per GBP. Question 2 (a) Explain what economic risk is, discuss how it affects Minion, and plans for mitigating economic risk. (b) Assess and identify 3 other risks faced by Minion. Your answers should exclude foreign currency risk and economic risk. Suggests risk management strategies for Minion. (c) Suggest three (3) functions and responsibilities of the treasury manager of Minion in the above context. Minion is a nutrition company based in the United Kingdom that specialises in manufacturing and exporting high-quality nutrition products to the United States. In addition, the company imports raw materials from various European countries and pays suppliers in euros. Minion has been in the nutrition industry for a long time and has established itself as a market leader. The nutrition industry is a highly competitive and dynamic industry that is constantly changing due to technological advancements and shifting consumer preferences. As a result, in order to remain competitive, the company has had to remain agile and responsive to changing market dynamics. The company has made significant investments in research and development to create innovative products that meet the changing needs of consumers. One of Minion's key success factors has been its ability to export its products to the United States, which is one of the world's largest markets for nutrition products. The company has a robust distribution network in the United States, allowing it to reach a large customer base. Furthermore, the company has been able to maintain competitive pricing for its products. allowing it to gain market share. Minion's international nature has exposed the company to a variety of risks, including foreign exchange rate risk. The company receives payments in dollars from its customers in the United States, but it makes payments to its suppliers in euros. Exchange rate volatility can have a significant impact on the company's profitability. Minion has therefore used hedging strategies to manage its foreign exchange rate risk. The finance team has overseen putting the hedging strategies in place and ensuring that the company's foreign exchange rate risk is adequately managed. However, concerns were raised about the company's foreign exchange rate risk hedging strategy at a recent board meeting. The managing director expressed concern that the company's raw material imports and finished product exports made it vulnerable. The volatility of exchange rates is one of the key challenges Minion faces in managing its foreign exchange rate risk. The ability of the company to forecast exchange rates accurately is critical to its success in managing foreign exchange rate risk. Economic indicators, political developments, and market sentiment all have an impact on exchange rates. As a result. accurately predicting exchange rates is a difficult task that necessitates a great deal of expertise and experience. The international business strategy of Minion is a critical component of their operations. The company will gain access to a variety of materials from various countries at competitive prices, ensuring the company's profitability and competitiveness. The availability of raw materials from various sources also provides Minion with a diverse supplier base, which is important in mitigating risks associated with supplier disruptions or market price changes. Simultaneously. Minion's export-focused business strategy allows them to generate revenue from the lucrative US market. The US market is one of Minion's most important markets, with demand for such products increasing significantly in recent years due to an increase in health-conscious consumers. Minion has a large customer base in the United States. The main concern, however, is currency exchange rate risk. Depending on the direction of the exchange rate movement, fluctuations in the GBP-USD exchange rate can be beneficial or detrimental to the company. These fluctuations can have a significant impact on the company's financial performance and their ability to invest in R&D or expand their operations. Minion's exposure to currency exchange rate fluctuations is complicated further by the fact that they import raw materials from Europe and pay suppliers in Euros. This exposure to multiple currencies complicates their operations because they must manage currency risk across multiple currencies. Minion's management team has identified the need for a robust risk management strategy considering these risks. Further, the company currently has substantial sterling funds on deposit. Minion has faced several operational challenges in recent years. The company's operations have been hampered by several environmental issues, as well as the country's high inflation. high interest rates, and slow economy. High inflation has also impacted on the company's suppliers, who have raised their prices to maintain margins. As a result, the company has had to investigate alternative raw material sources in order to keep its costs low. However, due to the scarcity of high-quality raw materials, this has proven difficult. Minion is also concerned about the country's high interest rates. Because of them, the company has had difficulty obtaining financing to fund its operations. In addition to these challenges, the slowing economy has had an impact on Minion's business. The company's sales have been declining due to weak consumer demand, which has been attributed to the country's slow economic growth. The company has been trying to find new markets for its products, but this has been difficult due to the low demand for nutrition products in the current economic climate. In addition to these economic challenges, the company has had to deal with several environmental issues in its operations. The company has been under pressure to reduce its carbon footprint and minimise the environmental impact of its operations. This has necessitated the company's investment in new technologies and processes in order to reduce emissions and conserve resources. To stay ahead of the competition, the company has been exploring new markets and investing in research and development. Minion has also been working closely with its suppliers to find ways to reduce costs and improve supply chain efficiencies. The company has been looking for ways to cut costs and increase cash flow. To improve its working capital position, the company has been negotiating with its suppliers to reduce prices and extend payment terms. Minion has also investigated new financing options, such as crowdfunding and peer-to-peer lending, in order to obtain funds at lower interest rates. The company has been expanding its product line and entering new markets. The company has been developing new products to meet the needs of various consumers. Receipts of USD5mil from USA customers are due on March 31, 2023. Assume the current date is 30 November 2022. Rates of exchange for Spot USD to GBP: 1.4336-1.4340 & forward rate USD to GBP: 1.4422-1.4430. Currency futures price for March is USD per GBP 1.4410 with a standard contract size of GBP62,500. For over-the-counter currency option, a March put option to sell USD with an exercise price of USD1.4390 per GBP is available. The premium is 3 pence per USD and is payable on November 30, 2023. Annual borrowing and depositing interest rates for the USD are 5.20%-4.80%; and for the GBP, they are 3.30%-3.00%. Assume the spot price on March 31, 2023, is USD 1.4484-1.4490 per GBP and the March futures price is USD 1.4487 per GBP. Question 2 (a) Explain what economic risk is, discuss how it affects Minion, and plans for mitigating economic risk. (b) Assess and identify 3 other risks faced by Minion. Your answers should exclude foreign currency risk and economic risk. Suggests risk management strategies for Minion. (c) Suggest three (3) functions and responsibilities of the treasury manager of Minion in the above context.