The term paper consists of the analysis of the impact of the international environment on the risk exposures of a firm of your choice. One of the major risk exposures internationally is foreign exchange rate risk and many firms have risk management programs. There are also other international risks (such as political risks) that can have an impact on a firm’s performance. You need to determine the risk exposure, whether the firm has a risk management program in place and how effective this risk management program is.
Specific steps:

We decide write Costco in China

1) Select a firm with international operations (minimum of 20 percent of sales or assets abroad) that is publicly traded.
We decide write Costco in China, please use this topic.

2) Obtain information about the firm such as which products it sells, where it does business etc.
3) Identify the major risks faced by the firm and whether it hedges its risk exposures or not. This information is typically reported in the firm’s annual report or the statements filed with the regulatory body in the firm’s home country.
4) Collect data on the four major risk factors that you have identified in (3) and the stock return of the firm (note that one of these risk factors must be an exchange rate). Test for a statistical relationship between changes in the risk factors and the stock return (regression analysis). Use the last 5-years worth of daily, or monthly data for your analysis. Note that two different exchange rates count as two risk factors.
5) Determine whether these changes are in line with what you would expect, given what you know about the firm’s operations.
6) Write a report up to eight pages long (12 point font, 1.5 spaced, double-sided printing is encouraged, just staple the final report and do not put a plastic cover on the report). Attach the printout of your statistical analysis on a separate page as an appendix. References and appendix are additional to the eight-page report.
The report should include:
(1) A description of the firm, its businesses and geographical operations etc., and how and why you expect the firm to be impacted by certain exchange rates and other risk factors.
(2) The statistical analysis, including an interpretation of the results.
(3) Comments on the relationship between (1) and (2).
7) Upload your report and your empirical analysis and include all the data used on blackboard so that I can check these if needed.

Recommended information sources:

Data:
Yahoo finance, company websites

Annual reports and other official filings:
Canadian firms: www.sedar.com ; US firms: SEC Filings & Forms (EDGAR)

Other sources:
Mergent Online, Wall Street Journal, Globe and Mail, Economist, Financial Times etc.

 
Marking Key

1) content of the paper
thoroughness and critical evaluation
all major points are appropriately addressed
1) Introduction
2) Description of the firm, its business activities, geographical operations
3) Descriptive analysis of the firm’s exchange rates exposure and other risk factors
-What does the firm do to hedge its exposures if anything?
-How and why do you expect the firm to be impacted by certain exchange rates and other risk factors.
4) The results of your statistical analysis.
5) Interpretation of the results
-Are the results from your statistical analysis consistent with your expectations? If not, what would be potential reasons?
-What did you learn from this analysis?
6) Conclusion
7) List of References
Correctness and completeness
all of the above don’t contain any factual errors and don’t leave out any
important issues
clarity
the material is presented clearly
_ \80 2) format paper is presented in a professional manner (note that I do NOT want you to put a cover around the paper; a stapled copy of your paper is sufficient. However the paper itself must be prepared in a professional manner). correct spelling correct use of words correct grammar graphs and/or photos provided when useful length up to eight pages (1.5-spaced, 12 point font, 1 inch margins, two-sided printing is encouraged for the sake of the environment) not including figures, graphs, references, and appendices. headers are appropriate page numbers are included _