Which one of these is an example of operational hedging?
A) Producing goods in a foreign country for sale in the U.S
B) Manufacturing goods in the country where they will be sold
C) Producing products in one location and distributing them internationally
D) Offsetting every spot trade with an opposing forward trade

Question

Quizplus · Accepted Answer

Operational hedging refers to the management of production and supply chain activities to mitigate risks. Manufacturing goods in the country where they will be sold can reduce exposure to exchange rate fluctuations and risks associated with international trade. This is because production costs and revenues are denominated in the same currency, which can reduce cost volatility and improve pricing flexibility. The other options do not involve modifying production or supply chain activities to manage risks, and therefore do not represent operational hedging.

Which One of These Is an Example of Operational Hedging