Your company, a leading farm equipment manufacturing multinational, has a production facility in South Korea to serve the East Asian countries. For the last two years the South Korean operation has been running a deficit balance of payments situation. The local government has expressed its concern on the state of affairs.
Your company wants the subsidiary to remain operational because it benefits the locals and contributes to the host country's economy. Besides, the subsidiary is an efficient production base. As the CFO of this company, you will have to act quickly to reverse the deficit. Write a report outlining the various measures you will take to reverse the deficit balance of payments situation. Your report must include:
The reasons for a deficit balance of payment account.The measures you will take to improve the situation.Include a discussion on exchange rate fluctuation in the local region that your subsidiary serves and the arbitrage opportunities to hedge foreign exchange risk. Make sure you address all the topics discussed in this module in your report.