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Minimization of risks while ensuring import efficiency in the context of changes in exchange rates

Author

Listed:
  • Marina Ivanova
  • Olena Varianychenko
  • Tetiana Arkhypenko

Abstract

The purpose of the article is a theoretical study and practical testing of the model of dependence of changes in the import effect on negative exchange differences taking into account payment terms based on forecast data. Given the current situation in Ukraine enterprises remain active participants in foreign economic activity and try to increase the efficiency of imports taking into account the risks of changes in the exchange rate. To perform the research, general scientific and special methods of system-structural analysis, synthesis and grouping were used to identify the main factors affecting the effectiveness of import activities; modeling and forecasting to identify the dependence of changes in the import effect on negative exchange differences taking into account payment terms based on forecast data; graphical methods to determine the dependence of the credit impact coefficient on the number of days of deferred payment. Based on the results of the literature review, it was found that the internal exchange rate volatility can pose a significant risk to the dynamics of world trade due to increased transaction costs and potential restrictions on trade interests which leads to de-internationalization. The study presents the author's approach to determining currency risk as probable losses or unexpected profits in comparison with planned ones due to changes in the exchange rate. It has been proved that the effectiveness of import activities is affected by exchange differences formed from the difference between the taxation of goods and the exchange rate on the day of payment for goods (deferred payment for 30 days). If payment for goods is made earlier than the specified term the company loses additional income which is confirmed by calculation of the credit impact coefficient. A model of changing the import effect from negative exchange differences was proposed taking into account payment terms based on forecast data for PJSC «Linde Gas Ukraine». The prospect of further research is the development of a strategy for hedging currency risks.

Suggested Citation

  • Marina Ivanova & Olena Varianychenko & Tetiana Arkhypenko, 2023. "Minimization of risks while ensuring import efficiency in the context of changes in exchange rates," Management and Business Articles, Management and Business, vol. 1(2), pages 84-96, November.
    • Handle: RePEc:bdw:emsesd:v:1:y:2023:i:2:p:84-96
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    References listed on IDEAS

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    1. Lal, Madan & Kumar, Satish & Pandey, Dharen Kumar & Rai, Varun Kumar & Lim, Weng Marc, 2023. "Exchange rate volatility and international trade," Journal of Business Research, Elsevier, vol. 167(C).
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