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Executive Summary
The objective of this article is to simultaneously survey the practice of risk management of large United Kingdom, United States, and Asia Pacific multinational companies (MNCs). We investigate whether risk management practices vary internationally. From 179 (30%) usable responses we find a number of interregional differences in the organization of risk management; a greater emphasis on decentralized structures in the Asia Pacific and less formal board control over risk management in U.S. MNCs. In terms of the tools of risk management there were differences internationally in the concerns in choosing derivatives, driven to some extent by differences in the accounting treatment internationally. In general, the size, degree of internationalization and industry sector of the respondent MNCs could not explain these regional differences. However, there was little variation in the methods of forecasting exchange rates and the majority of MNCs in all regions use a centralized risk management system. (C) 2001 John Wiley &Sons, Inc.
INTRODUCTION
arshall (2000) surveyed foreign exchange risk management in large multinational companies (MNCs) in the United Kingdon, the United States, and Asia Pacific, investigating their use of derivatives and their emphasis on different types of currency risk. Yet, an unreported part of this survey was a complimentary international investigation into the practice of risk management. In this article we report the results of this part of the survey, where the research question was whether the practice of risk management varies internationally. This included questions on the organization of risk management within the MNCs, the controls on risk management, the methods used in forecasting exchange rates, and the respondents' perceptions on risk management issues, such as accounting treatment and their concerns in choosing one of the main tools of risk management-derivatives.
There have been a number of single country studies on the practice of risk management, some using case studies and others using a questionnaire approach.1 We contribute in this article by investigating only the largest MNCs in each region rather than a cross-section of companies, carrying out a simultaneous international comparison between regions using the same survey questionnaire and by considering the views of many of the countries in the Asia Pacific region, which have never been examined before.2
The results indicate that, consistent with previous evidence in...