Posted: May 13th, 2023

CHAPTER TWO LITERATURE REVIEW

CHAPTER TWO LITERATURE REVIEW 2.0. Introduction This chapter is designed to review literature on relevant concepts and theories relating to the research. This chapter provides a theoretical structure of the various researches highlighting on the essential and relevant definitions, concepts and explanations. Among these concepts and issues are definitions and the critical analysis of management of foreign exchange risks concepts in Mauritius. Moreover, the study providesgrounded information on prepayment, futures, forwards and human capital. Finally,the chapter provides a summarized literature review pinning out the research gap in case of export driven Mauritian textile industry.
2.1. Foreign Exchange Risk management The spontaneous adoption of globalization and liberalization by most of the countries such as Mauritius as well the need to spearhead international based business exposed most them to high volatile exchange rate.
In the recent past, the value of Mauritiuscurrency had impulsive and non-predictable fluctuation.The resultant variations had profound consequences on the foreign currency hence an impact on foreign and domestic sales. The present studies revealed a thumb nailed improvement in most of the countries on foreign exchange exposure based management(Ahmad & Suleiman, 2009).
Due to the international based dependent, the textile industry in Mauritius has been severally influenced by foreign currency fluctuation. Foreign exchange risks management can be based on three foreign based exposures; translation exposure, transaction exposure and economic exposure.
Recently,it has been found that most of the textile companies in Mauritius have strong foreign exchange exposure management system. They have been hedging the foreign risk so as to reduce losses.
Moreover, most of these companies are aware of foreign exchange risks and they try to estimate extend at which annual earnings are going to be influenced by the risks. In addition to that most of the textile companies are managing only their transaction based exposures.
Few of them have the ability to withstand economic based exposures found to have strong impact on sales performance. Translation exposures arise from the need translate some foreign currency based assets into home currencies which eventually lead to risks. Any foreign exchange risk emanating from some unknown sources have serious impact on the textileindustry. Tackling some of these risks require high management skills possibly from the strategic level. In most cases, those unmanaged foreign exchange risks causes variation in the market value and earning of the firm. Moreover, the risks may continuously threaten firm based viability bringing the company into bankruptcy.
Foreign exchange risk management is highly essential nowadays at the cross borders because textile business grows daily. In most cases, success of any business and especially the textile industry in Mauritius will depend on how effective the foreign exchange risks are managed. Foreign exchange risk based management is one of the multi staged item that call for full identification of all exchange rates exposures. Get research paper samples and course-specific study resources under   homework for you course hero writing service – Manage rs are required to monitor, quantify and correctly assess the risk profile based on operating costs.
Usually, the foreign exchange rate risk can be trimmed through hedging process. Hedging refer to those strategies used to reduce risks on foreign exchange rates. These help managers to reduce future uncertainties denominated in home and foreign currencies. The management of foreign exchange risks can be adequately improved through having variety of financial instruments such as option, futures and forwards and that allows risks transferred to other parties. It should be noted that foreign exchange risk management strategies cannot completely wipe out risks but bring them into manageable level.
An article “Managing Foreign Exchange risks” and written by Shapiro and Branford provide us with a precise step by step procedure on how to formulate efficient and effective economic based strategies for managing the currencyrisk. The first step; is to estimate the exposure level of the business to currency risks. Secondly,identify the main objective of the foreign currency based risk management system. In the third stage of management, managers should design comprehensive company based policies purposely to meet the objectives. Currency risks hit all corners of company portfolio hence it should be the work of financial analysts and managers alone.
Moreover, another article “The management of foreign exchange risks” and formulated by Ian and Defey revealed that currency fluctuations impact on cash flows,liabilities and assets of the company. The risks are severe on certain occasions for instance when the economic realistic based situations differ from the predicted measure of translation and transaction exposures. The article proposes certain principles which among them include clear distinction between the currency of denomination, location and currency of determination.
2.2. Human Capital The recent economic down turn across the globe has greatly influenced human capital various countries since 2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers.Human capital can be defined as the skills,capabilities,expertise and technical know-how of a company’s staff. Usually,the human capital can be measure through formal education,skills,training talents,experience,knowledge and habit of the employees.Essentially,these employees’ tools define the firm based economic value. No substitute for human capital and therefore optimum yield can only be attained strong firm strategies. Therefore, the employees are expected to exemplify high level of agency based skills, technical knowledge and competences, experience in financial matters and provision of high quantifiable quality services.
A skill is the ability in an employee through deliberate means to perform a certain function or activity using certain effort. Skills can be divided into three; cognitive based skills, technical skills and interpersonal skills. The cognitive skills creates new ideas, the technical skills help things happen while interpersonal based skills help the employees communicate well to each other. It has been found that skilled employees are positioned to influence strategic choices for example foreign currency risks. Human capital specialists advocates for continuousprofessional skills provision s so that employees can adequately meet the current ever changing situations. Researchers assert that employees equipped with proficient industrial based skills are highly competitive hencethese promote high industrial value. It is essential for all companies such as textile industries in Mauritius embrace capacity building on human capital.However,several challenges face skills innovations since introduction of computers which requires use of capital intensive based technology.
Secondly, training is defined as a planned effort by different companies to impact additional knowledge on own employees. It has been found that training complement attitudes, assessment and relationships of different employees during working hours. Most companies devoting time to train employees find it easy in evaluating them. However, some fail to evaluate output after training hence a loss of human resources. Small companies have limited resources for training the employees yet well trained work force will promote competition and quality service delivery. Human capital specialist argues that the best investment that a company can make in employees is complimenting education and skills with training. Trained employees are confident of what they do. Moreover, they can harness new ideas found to spur progressive risk reduction and high profitability level within the company. However, it is essential for the company to evaluate training costs regularly.
The third element for human capital; experience can be defined as a mastered skills that employees have acquired over several years or months of practice. Essentially,the employee manifests such exceptional knowledge that surpasses skill or education.
In most cases, orientation of new employees can also yield some experience in any company or industry. However, the textile industry and other sectors face hurdles in controlling exit of experienced employees.
In most cases, experienced staff will migrate from one company to the other purposely for new rewards, challenges or opportunities. However, there are few talented employees noted and retained amid of high cost of keeping them.
Therefore managers are advised to note, nurture and retain talented human capital. The most fundamental activity for successful company is on how employees are retained and used to generate revenue. In conclusion,effective based strategic management of human resources is vital for most of the experienced employees who are found to steer and gear company mission and vision.
Lastly, human capital can be measured through performance. Performance can be rated through balance score card that defines how employees willexecute duties toward company’s mission, goals and vision. In most profit making companies, performance can be measured through profitability and sales level for example in a forex bureau. Moreover, other companies may rely on the Likert performance measurement tools that require top management to efficiently and effectively meet company’s goals(Tan, et al 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap).
Foreign exchange risk management and performance are interrelated. Essentially, the former is a function of the other. Therefore, foreign exchange risks affect the profitability and sales volume. Fluctuating exchange rates reduces cash flows that result to low profitability level hence influencing the financial performance of different companies.Forex managers are advised to implement some mitigation measures that can help to stabilize the financial performance in volatile currency markets. In most cases controlled currency risk result to full arrest of financial distress in most textile companies. It is recommended that Mauritius implement such measures.
2.3. Methods of Foreign exchange Risk Get research paper samples and course-specific study resources under   homework for you course hero writing service – Manage ment This section briefly introduces the available measurement techniques at hand for foreign exchange risk management.
a. Payment Setting This process involves setting off all dues or debts by reducing fund transfers amid affiliates to the netted sum. These essentially reduce the flow of funds hence minimum trading in foreign based currency transactions.
In most cases, multinational companies increases the global based rationalization leading to a heavy volume of intercompany based fund flows. It leads to transfer of the netted amount of payment leading to a significant reduction of savings which in turn reduces the foreign exchange level of spreads.
Moreover, thereduction in foreign exchange leads to reduced float and transaction costs. However,if the netting based payments are made through just pen and papers,and then reduced transfer cost opportunities may not be realized within the interatefiliate accounts.
The main advantages of all these fund physical flows are that heavy intercompany fund flows get witnessed within the international based financial executive counters. The essence of the whole process is to determine the measurable cost of fund transfers said to measure the level of risk.
The measurable cost involves cross border costs and cost of purchasing the foreign exchange based instruments. However it should be noted that bilateral netting will have no use because of any complex structures of internal based sales.
In most cases the payment netting service will be provided by clearing houses. This method of payment allows the securities to stay with the original owner of the asset. However, there are challenges for instance where several actors are involved.
The clearing house must ensure that all parties gets their share at the end of the day. b. Prepayment This method of payment “requires the importer to pay the exporter in full before shipment is made” (Hill, 2001, cited from Abor(2005)).In this method, the importer s must have trust in the supplier that the products will be submitted to their destination on time and in the right quantity.
The prepayment risk method contains a lot of risks especially to the importers. In international based trade, this method of payment can be used where the importer is not established for a long time.
Secondly, where the importer’s payment status are questionable or unsatisfactory.Moreover, these payments will also be allowed where it is difficult to access the importer’s country of risk due to political turmoil or war.
Lastly, it can also be applied in a scenario where the demand of the traded product is at a high demand and the supplier doesnot have time to wait for the importers to pay using other means.
There are several risks that can be attached to this method of payment. First, the supplier may fail to deliver the product. Moreover, the seller may deliver to importers substandard products which had not been ordered.
Secondly, the buyer must have adequate cash for the products to be shipped. In addition to that, most of the sellers do not deliver the product when they have been required.
The importers must wait until all manufacturing and packaging processes have been met. This method of payment is not suitable for perishable products. Prepayment method measures foreign exchange risk through assessment of the value attached if the products had not been delivered(Shapiro, 2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers).
C.Leading and Lagging This is simply decelerating or accelerating the receipt or payment of certain transaction that a company intends to make. In foreign risk management, only two main types of leading and lagging concepts are used;interfirmor intra firm and lags. An inter firm lagging and leading involves two or more different firm that are independent from each. However, for risk reduction one of the firms must be exposed to risks on behalf of the other. On the other hand,intra firm leading and lagging involves two firms which are related and have a common objective. The management may come into agreement for one firm exposed to risk and reduce for the other. This is usually seen by forex analysts as a move for both firms to mutually benefit from each other in term of risk management.
Essentially this accounting technique of leading(expediting) and lagging(delaying) the payments and receipts of cash have certain economic merit on businesses and especially in foreign trade. An example for this scenario is where a manufacturer intends to pay one million dollars for certain imports. The trader may decide to delay payment for the imports to get an order from exporters of one million dollars. Thedelay helps the manufacturer to tactically raise adequate revenue for imports from the customers. This means that cash flows from export is used as outflow for import of additional raw materials. This means that the manufacturer escapes te devaluation risk in terms of import payment and default risks arising from exports by just juggling with two cash flows(Schweyer, 2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers). Lastly, subsidiaries firms may also delay receipt and payments to the parent company so as to defer taxes to next financial year.
Essentially the leading and lagging method of foreign exchange risk management indexes are characterized by proper timing and accuracy. Timing must be the leading or the lagging time relative to the targeted time series. Accuracy on the other hand must be measured through comparing the direction of target changes within the indicators. If the leading and lagging indexes are plotted then a rotational based indicator showing maximum consumer price index results. This is used by exporters and importers to make the time at which to delay payment of facilitate receipt of cash.
There are various demerits that arises when a manufacturer decide to delay or adjust the time taken to make foreign currencies payment(Evans &Doupnik, 2006 – Write a paper; Professional research paper writing service – Best essay writers). First,the delay may occur when there is currency depreciation meaning some of the traders will lose at expense of others. The company may intend to take the advantages of currency devaluation yet on the other hand harming others or customers. Although this method of foreign exchange risk management technique is used frequently by associate based companies, the tactics may flop when their exchange rate changes expectations are not realized. Third parties are likely to lose a lot of credit facilities or even charged exorbitant prices to compensate the delayed receipt of revenues. Lastly, some of the exporters may go for liquidity damage in case of delayed payment.
There are several indicators that manufacturers must consider before applying the method. First, they must know the devaluation rate of the currency, the total incidents, time taken for delaying the payment, the customers and the third party well. Customers are highly sensitive and delay means shifting to other sources. On the other hand, some of the third parties may go to court and claim damages hence vital to understand them well. Normally,they should also predict the rate at which the currencies are going to be revalued so as to avoid any loss. If all these indicators are put into consideration, then there are chances that the associate companies will manage the foreign exchange risk and hence benefit.
d. Forwards and Futures Forwards and Futures are some the financial instrument used to hedge foreign exchange risks. Essentially,they are different in that forward contracts on asset are those agreement entered by two parties; buyers and sellers to exchange certain cash for a certain asset at a certain price (forward price) over a given time frame.
In most cases, the forwards transaction will be non-standardized, non-regulated taking no price in a clearing house and secondary market. In forward agreements, the asset underlying the contract is called underlying while the current prices used are spot prices.
Both seller and buyer choose a certain date for exchange of the asset. Note that no money exchanges hand during the settlement date. The parties must agree on the forward prices to avoid conflicts.
Moreover,the forward are not traded in the exchange markets meaning that no partial interim payment is allowed between the two parties(Constantinides, 2015 – Research Paper Writing Help Service). Futures are mainly used where we have vulnerable currencies in the market.
This means that parties are forced to exchange assets and cash based on a certain reserve prices so as to manage the foreign exchange risks for example a trader in the Mauritius textile industry may use the cotton as an asset and pledge for cash.
Given that a significant number of traders and investors may sacrifice to issue cash for the asset and incur risk, foreign exchange market allows such transaction to take place. The futures can be used to hedge foreign exchange risk up to a bearable level.Given that in international business dealing, fluctuation of currencies trigger losses, it is vital for the traders to shelve themselves by issuing forwards contracts.
The forward contracts are so customized that the parties must fix the exchange rates to certain level for future business transaction(Redhead, 2007). This agreement will avert risks because any fluctuation will not be put into consideration.
However, the agreement has several shortcomings. In case of foreign exchange market, the company that will receive the large share of foreign currencies from her customers will incur the whole risk if the currency depreciates meaning that it will go short.
On the other hand, ifit’s dealing with suppliers then it will go long. The greatest challenges emanate in the market particularly where the traders have to look for the county party who agree to sacrifice in fixing the prices for future transaction. Most of the traders will question the time frame, loss of money value and hence fear such agreement. In addition to that, forwards are not traded in most of the exchange markets. Moreover,most traders are not aware that banks may offer forward contracts hence a challenge in spontaneous use of the tool in hedging foreign exchange risk. In addition to that, they are termed informal because they are traded in non-formal based trading facilities or regulatory bodies(Chorafas, 2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers).
An example of using forward contract is where the one of the textile companies in Mauritius enter into contract with the government to supply clothing companies with cotton at a cost of 10,000000 dollars paid after completion of the work in ten years’ time. The amount is consistent with minimum revenue; 1000000 dollar at the exchange rate of 10 per dollar. The company may enter into contract with a bank to fix the exchange rate at 10 dollars. The forward contract is an obligation between the company and the bank that any exchange rate fluctuation will not be considered. Any decline in currency value will be borne by the bank and not the company. The existence of speculators such as the bank help to ensure that county party position is available. The company is guaranteed of a fixed exchange rate amid of currency depreciation.
On the other hand, the futures possess several features which are standardized. All futures are traded in the exchange market, issued in clearing houses and they are highly regulated. These features are essentially aimed to improve the liquidity level of the financial instrument in the market. The futures are vital in the foreign exchange market where traders face difficulties in matching transactions. Some of the standardized elements within the futures are maturity time, price limits,contract size,position limits and the expiry dates. In foreign exchange markets risk management, the future possesses some advantages such as;
First, the futures are highly liquid because of the central market. Most of the futures are traded in clearing houses hence a central market to attract more parties. These participants accelerate sale or buying rates.
Most of them face double coincidence of wants hence futures are highly purchased or sold compared to forward. However, the liquidity state poses some risks because traders can opt to facilitate opposite transaction before exiting.
Secondly,futures help traders to hedge heavy amounts of outlays with small ones hence an advantage. This feature can be attributed to high margin level witnessed from the amplified profits or losses.
In addition to that, traders are free to close out their position and exit in the market. However,traders are allowed to close out if they make opposite transaction in the exchange market.
The traders are expected to be physically present on the floor to witness profits made offset the losses incurred. However, some of the offsetting may not be perfect although brought about by the standardized measure in the future contracts.
Lastly,there is convergence in prices where the time frame and prices are equal to avoid arbitrageurs who made come in to make profits if the prices vary. Just like the forwards, futures have certain disadvantages.
The futures are legally obligated like forwards meaning that they can create problems to the business society. If it is applied on assets within bidding process then it will change to speculative position.
This is an open opportunity for arbitrageurs to intervene and exploit the market for heavy profits. The perfect hedging may not materialize due to fixed standardized agreements.In futures, all expiry dates,contract sizes,prices and positions are standardized.
Third,future experiences huge daily and initial variation margins. Any traders planning to trade with future must be an initialdeposit in the clearing house. However,the deposit is returned once the trader decides to close his or her position.
Moreover,their market status is tracked on daily basis.The initial deposit s can cause a heavy fund burden to the hedgers. A lot of traders have been locked out of the market once they fail to raise the amount.
Lastly, the presence of future in our foreign exchange market has resulted to loss of favorable movements. This can be testified through offsetting of profits and losses by losses and profits from the future based transactions.
This shortcoming can be justified on the presence of legal obligations and several initial payments needed before registration. The resultant solution was a development of a more favorable financial instrument; options.
The fundamental benefit of the two financial instruments in foreign market is to adverse risk. Essentially, most of the international companies have opted to use them to reduce risks. This is because both of them promotes fixation of prices such that in case of foreign currency fluctuation no losses are incurred.
However, the futures are highly available in most of the stock exchanges because of the high demand. In the transaction process, asset will be exchanged later but prices are set today.
The seller can be referred to as short while the buyer is said to be long.It is important to note that futures have interim based settlement margin requirement.This means that parties can continue to exchange some properties when the contract is still open.
This means that future users have an option to continue securing themselves hence highly secured compared to forwards. Futures and forwards involve heavy capital investments hence currently used by multinational companies such as those constructing roads, railways or Microsoft.
2.4. Foreign Exchange Risk Get research paper samples and course-specific study resources under   homework for you course hero writing service – Manage ment and Performance Performance is one the measures for organization’s achieved results. From the financial based perspective, foreign currency risk management influences performance. Essentially various researches revealed that foreign exchange risk management is a function of financial position and performance.
In most cases fluctuating foreign exchange risk reduces cash flow and profitability level of the firm. Moreover, it influences the sales volume, profit margin and overall liquidity level of the firm.
In most cases the financial and forex managers must implement certain mitigation based measures so as to reduce such risks, stabilize the financial performance and eventually give the company a competitive advantage over her rivals.
An example is the foreign fixed deposits which essentially earn interests on the saved principal amount(Evans &Doupnik, 2006 – Write a paper; Professional research paper writing service – Best essay writers).However,the performance depends on external economic forces from the foreign market which include; real time economic quotes, currency capabilities and reliable payment online based offers from the currency deals.
Financial analysts admit that efficient cash control measures promotes the sales and profitability level by incorporating the foreign currency exposures. This help the firm to achieve most of the long term plans and to reduce cost of operations by arresting unknown financial based distress of most of forex within our bureaus.
The analysts reveal further that optimal financial and economic performance must have specific strategies which tap high market information on certain essential tools such profits and sales. Proper handling of the currency based fluctuations help to improve risk management strategies by ensuring that forex market liquidity and speed has been contained. Just like in other businesses, thehigher the risk the higher the profits or losses therefore managers are expected to make financial decision putting into consideration the spread rate. This documentary transferred back to the company through statement of financial performance and position. Eventually, the currency based inventories are converted into local currencies within the firm locations.
The forex manager should also facilitate technical analysis which plays a higher role in ensuring that sales volume is kept higher and higher. Always, the financial stakeholders are advised to borrow and implement practical statistical tests and routines.
The profit knowledge should be based on currency market. Essentially, leave the currency market set limit based orders for the profits and just control them from exit points. Moreover, investors should use the foreign market behavior to make a trading based methodology that sets profit limits and hence allow the market to control the sales and cost of operations.
It is also vital for the forex and financial managers to keep on monitoring the costs and to allow all decisions to influence sales and cost levels(Riggs & Bonk, 2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers). Moreover, the same applies to losses where we must have a loss command on how much the company should make as a loss in extreme cases.
This helps the investors to control the risks and uncertainties because the losses have been preset on certain level. In addition to that,management of forex based risks should categorically be aligned to objectives of the firm which involves shareholders objectives;wealth and sales maximizations.
The presence of limit orders for either losses or profits means that the forex investors are risk takers and performances has been aligned with risks. The managers can help investors reduce risks by focusing on one currency market by noting down the risk averse behaviors of the firm.
The investors should have a list of all currencies in descending order and to ensure that all earnings have been stabilized so as to limit insolvency level. However, the limit orders should be placed away from the market prices as the changes can influence the order.
Note that the limit orders on loss or profits set a rational hope for profits and all shareholders are keen to see them attained. On the other hand, forex rates must not be overs posed to the market but be rational proportions(Jain 2007).
To wrap up, foreign currency risk management cannot be assumed in financial performance. Shareholders put business purposely to maximize well and profits. In order to attain these objectives, the forex manager must ensure that sales, profit and margin ratios capture the risk element.
In most cases the limit orders will not be achieved because of economic based deviations(Hull, 2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers). However, this should not haunt the investors given that risks are part of the business and the higher the risks the higher the profit or sales margin.
Low currency based spread and underpricing may also reduce performance because they can be influenced by foreign currencyrisks. The managers are therefore required to monitor the exchange rates and to make imports or exports when we have low and higher currency value respectively.
Current assessment is a daily activity for forex managers purposely to reduce loss within company premises given that the greatest challenge; high exchange rate volatility results to low turnover, cash flow and uncertain profits.
2.5. Human Capital and Performance Performance and human capital provide one of the best measurement link in creating and maintaining competitive merits for the firm based knowledge and more so in forex bureaus. Although employees are cost and also asset of the firm, most companies prefer to rank them on cost side instead of asset. This has caused a stalemate in most companies because efficiency and effectiveness of the employees are compromised leading to poor performance. Most empirical studies have revealed that a positive relationship exist between human capital development and performance(International Conference on Informatics and Get research paper samples and course-specific study resources under   homework for you course hero writing service – Manage ment Science & Du, 2013). The market value of the firm is dependent on intangible human capital which significantly promotes motivation within employees’ high performance.
In most cases, the human capital will concentrate on both firm and employee meaning the outcome has significantly been determined through competence, organizational structure, adaptability and flexibility of resources and employability level. The organizational performance can be improved through employment of quality human capital. In most cases, the performance of any business in the forex industry will be determined by competitive advantage firms have over the rivals. Therefore firms are required to invest heavily on employees through job training and education. Essentially all those firms recording magical growth pride of employing quality staff who are subject on an intensive based training.
The application of Resource Based View (RBV) technique leads to higher competitive advantage especially on strategic matters because it can balance the competitive forces of different human capital. Thetechniques facilitate all firms in combing the resourcesavailable and effectively engaging them constructively(Dudek&Practising Law Institute,2013). Therefore the human capital is the best real based asset which can give firms best competitive edges over rivals by improving employees performance. Note that competitive advantages arise where the skills are distributed unequally within employees of different but complementary firms.
Recently, most of the companies have reportedly said to apply RBV which has improved employees relations making them most essential asset of any business in terms of performance. Other studies have revealed that skill equity and complemented talents help to sustain the competitive based performance.Although competitive based firm merits are unique, benefits arising from high productivity improve financial capabilities. The long experience employees tend to enjoy a good business perspective which cannot be easily eliminated. Essentially experience must be applauded in recruitment process because it means new business ideas employed. However,the experiences must be supported through schooling and on job training knowledge. This argument can be supported by stating that entrepreneurial success depend on how well experience the entrepreneur is. Moreover, the experience will help the business expand and tap newtalents. However, retaining and recruiting best employees help to ensure that firms enjoy competitive advantages over rival.
Therefore, organization must provide grounded training and education to employees through supportive based environment. Learning is inevitable and the more the employees are skilled the more they are technically fit to bring in new idea and reduce operation costs. Therefore we can admit that training and experience are most valuable assets that a firm can give staff foe efficient service delivery. The more the employee are educationally dynamic, the higher the performance(McDonald, 2006 – Write a paper; Professional research paper writing service – Best essay writers).The greatest weakness of human capital is how to retain, implement and improve the financial based decisions. However, the challenge can be solved through organizational retention, investing on management and reducing those risks found to slow down productive growth. Therefore in summary, employees are expected to improve competency through education on job training and gathering relevant experience. The firm must provide adequate resources so as to motivate the employees before enjoying high performance.
2.6. Human Capital, Foreign Exchange Risk Get research paper samples and course-specific study resources under   homework for you course hero writing service – Manage ment and Performance Essentially, dynamic based business situations will definitely define the financial performance of the business. This is essential because it help in making competitive based decisions and strategies. Any collection of human resource or capital will help to improve the sales and profits of the company. It should be noted that human capital facilitate union of all parties in the company through education, training skills, experience and other items leading to improved performance(Hill, 2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay).
The foreign exchange risk management based strategies can be enhanced through training and further education which equip the employees and managers with necessary skills. Research on forex reveals that managers should also understand other risks such as cash and liquidity based risks.
In most cases the success of employees in improving sales and profit level will be based on risks management and the acquired skills. It is therefore advisable for all managers and employees to put into consideration the exchange based risks in day to day activities.
The forex market need some special skill coupled with adequate resources and plans so as to yield positive present value which means that revenues and profits were materialistic. Additionally, the traders should also be keen on certain exchange based indicators and the basic currency values so as to avoid any loss in near future.
This is because the basic currencies are highly unpredictable and volatile in nature and therefore can trigger inevitable losses in the company. The foreign exchange risk management demands a collection of knowledge, experience,analytical based skills in the market and especially to those currencies more volatile than the others.
The presence of adequate human capital coupled with proper foreign risk management tools lead to high market performance hence high sales and profits. Moreover, the managers need to maintain high management skills especially on money matters and technical based skills.
Therefore we can concisely reveal that the currency market can be repositioned as to enable the companies reduce losses while maximizing profits and sales(Riehl, 2009). The forex market dealers and their employees are required to undergo some intensive human capital based training that equip them with necessary skills and knowledge on how to manage risks and improve the sales and profit performance.
In addition to that, the firm can perform some internal audit of the employees to identify any knowledge gaps and inexperience so as to equip them fully. In conclusion, firms’ performance especially on sales and profit depend on how the foreign currencies risks are managed and human capital. Competitive business in the market can train, recruit or even hire experience employees who will bring in new idea and boost the performance level. Moreover, the firms can also acquire knowledge on the risks through the stock market which usually provide it through social media. It is detrimental for any business to engage in foreign exchange currency without adequate knowledge and skill about the currencies. Currencies are highly volatile and can lead to dramatic loss of business value especially in fluctuating stage

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