Finance-Risk Management

As a company that operates their business internationally, Boeing interacts with customers and suppliers whose home currencies may not be U.S dollars. Boeing is exposed to a variety of market risks, including the effects of changes in interest rates, foreign currency exchange rates, and commodity prices. To help protect against the risks from currency fluctuations, Boeing generally turns to currency hedging. This preserves the exchange rate between two currencies at a know value. Hedging …

…the technical complexity of a long life cycle of products. They use a technique called Real Options that extends the net present value to evaluate the adjusted return on investment and cost-versus-risk issues. When Boeing is debating on whether to invest in a new business, this simulation analysis can help get beyond a simple expected value, and provide a risk analysis to answer their uncertainties. References Boeing 2002 Annual Report Mathews, Scott. Boeing Application Success Story. 2003