Financial Risk Management Assignment Outline
Foreword
- How the group has come up with the topic and general view of the assignment
- Set expectation on what our group can expect to gain after doing the assignment
- Acknowledgement of resources and data source used in the assignment
I. Introduction
II. Content
1. Main concepts:
- Market risks and types of market risks
- How companies using derivatives tools to hedging risks: futures contract, forwards contract, option, swap, etc.
2. Analysis
2.1. Why choosing Monsanto?
2.2. What is Monsanto?
- An American company produces agricultural products, herbicides and biotech-related products
- Characteristics?
Manage their business in two segments: + Seeds and Genomics + Agricultural productivity
Have worldwide distribution and sales both domestically and with companies outside America.
2.3. Which types of risks Monsanto is subjected to? Their impacts on Monsanto’s business performance? a- Changes in commodity prices
Having substantial impact on its performance because of the high level of dependency on external raw-material suppliers (Monsanto produces or contract with third-party growers for corn seeds, soybean seeds, other seeds. The availability of seeds and cost of seeds production depend on seeds yield, weather and commodity price).
b- Changes in interest rate: Due to debt portfolio
c- Foreign Currency Fluctuation: Its big foreign market
2.4. How Monsanto using derivatives tools to hedging risks in reality?
- Assess its performance and efficiency on these activities (based on statistics on the gains and losses on the company’s derivative