Currency Risk Management Strategies for Contracting with Japanese Suppliers

This article presents the results of an experimental examination of the performance of various active and passive approaches to managing foreign exchange risk in international sourcing. The experiment used a simulation methodology which encompassed thousands of sourcing transactions for a selected currency, the Japanese Yen, over a period of several years. Based on the results of this experiment, the authors have delineated a set of guidelines for the management of foreign exchange risk for U.S. firms sourcing overseas and using the Japanese Yen as the currency exchange medium.