... whose returns may be affected by changes in the exchange rate. Hedging, in terms of currency terms, is the attempt to anticipate, or at least avoid suffering from, future exchange rate movements ; hedging instuments can also be used speculatively , to benefit from exchange rate movements. This essay discusses in a first part how as a financial Chief officer should consider the general issues when deciding whether to hedge foreign exchange rate exposure. Following to that, Rolls Royce has a significant amount of transaction exposure and in order to reduce it, an appropriate method to hedge that exposure is needed. 1.Discuss the general issues that should be considered when deciding whether to hedge foreign exchange rate exposure . It is widely believed that exchange rate changes have important implications for financial decision-making and for firm profitability. Changes in foreign exchange rate can influence company cash flows positively or negatively, especially if an organisation has ...

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