Transferring and sharing exchange-rate risk in a risk-averse supply chain of a multinational firm
We consider currency risk management in a supply chain of a multinational firm with risk transfer and risk sharing contracts. We study and compare the impacts of risk transfer and risk sharing contracts on utilities of supply chain members. We identify conditions under which all members are benefited from implementing such risk management contracts. We conduct sensitivity analysis with respect to transfer price and the location of the headquarter. We find that using the two contracts jointly may not necessarily result in better utilities of all divisions.
multinational firm currency risk management supply chain management risk-transfer risk-sharing