| Course | GF584 Treasury Management II |
|---|---|
| Unit | Unit 10 |
| Paper type | Risk management report |
| Length | About 1,140 words, 7 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MS in Finance |
| Updated | October 2026 |
Free sample paper for GF584 Unit 10
What Remains After the Hedges: A Unit 10 Risk Management Report for a Grain Dryer Maker
[Student Name]
Purdue University Global
GF584: Treasury Management II
Unit 10 Risk Management Report
[Instructor Name]
[Date]
The dryer maker and every figure are composite and illustrative, carried from earlier units; the articles cited are real.
Summary
What was measured. Four exposures: Australian dollar receipts, a won price clause on motor purchases, the translation of the Brazilian subsidiary's net assets, and interest on floating debt.
What was done. Forwards on 22.0 million Australian dollars of committed orders; a put on 15.5 million of fourth-quarter forecast sales; a swap fixing $54 million of the $90 million term loan.
What remains. About $1.62 million of one-year Australian dollar risk at 95 percent; about $2.11 million on the won clause, unhedged; a translation figure of about $12.8 million, reported but not hedged; and about $533,000 on the remaining floating debt.
One decision is needed: the Brazilian development loan would breach the notes' priority debt basket and the policy's borrowing clause.
The Residual Table
Each row gives the measured amount before action, the response, its cost, the residual and the trigger for review. All figures are 95 percent, one year.
1. Australian receipts: $4.30 million; forwards and a put; $308,700 premium; $1.62 million; quarterly remeasurement and each new booked order.
2. Won price clause: $2.11 million; none yet; nil; $2.11 million; the won moving within 1 percent of a band edge, or contract renewal.
3. Brazilian translation: $12.8 million; reported only; nil; $12.8 million; any dividend plan or covenant change.
4. Floating debt: about $1.33 million on the full loan; swap on $54 million; no upfront cost; about $533,000; fixed share leaving the 40 to 80 percent corridor.
The residuals are not added. The four exposures are driven by different rates that do not move together, and the translation figure moves reported equity rather than cash, so a sum would describe no outcome the company could actually face.
The table's most important column is the residual, not the response: after the hedges, the company still carries more risk on an unhedged motor contract than on its Australian sales, which is the reverse of where attention has gone this year.
Australian Receipts, Stepped Down
The Unit 3 workup measured $4.30 million of one-year cash flow at risk on 58.8 million Australian dollars of net receipts, treating the four quarters as points on one rate path. Forwards on committed orders, priced at parity rates in Unit 4, locked in $14.58 million and brought the figure to $3.20 million. A put on fourth-quarter forecast sales, chosen in Unit 5 over a participating forward because the forecast volume is uncertain, brought it to $1.62 million. The remaining risk sits mostly in second- and third-quarter forecast sales, where cover will be added as orders are booked.
The Won Clause, Still Open
The motor contract identified in the Unit 1 post adjusts the dollar price once the won leaves a band 3 percent either side of its base rate. At 95 percent over a year, the clause could add about $2.11 million to purchase costs. It is unhedged because the treasury register did not record it until this year. Buying won forward in an amount matched to the clause's expected adjustment, or a negotiated wider band at the contract's renewal next spring, are the two responses under study. Because the clause starts acting only outside the band, a forward would need to be sized to the expected adjustment, not to the full $20.8 million of purchases.
Translation Reported, Not Hedged
The Brazilian subsidiary's net assets of about $56.88 million could lose $12.8 million of dollar value in a year at 95 percent. The figure sits in the table without a hedge for two reasons. It changes reported equity only; cash is affected only if the subsidiary pays dividends or is sold. And its one link to a contract, the notes' priority debt basket, moves the other way: a weaker real shrinks the Brazilian loan's dollar value faster than it shrinks the cap, so the shortfall narrows. Jorion (1990) found that the stock-market sensitivity of US multinationals to the dollar was modest relative to their foreign holdings, a reminder that balance sheet restatement overstates economic risk.
Floating Debt After the Swap
The Unit 7 memo fixed 60 percent of the $90 million term loan, the smallest round share that met the board's tolerance. The remaining $36 million floating adds about $533,000 of interest at 95 percent over a year. The planned Brazilian development loan carries a fixed real rate and adds no interest rate exposure, though it adds currency exposure at the subsidiary.
Governance
Every live position was checked against the Unit 8 policy.
1. First-quarter forward, 16.0 million Australian dollars: about $10.6 million notional, approved by the chief financial officer under clause 3.2; committed cover under 5.1.
2. Second-quarter forward, 6.0 million: treasurer under clause 3.1; committed cover under 5.1.
3. Fourth-quarter put: chief financial officer under 3.2; counts at its delta, about 38 percent, inside the 20 to 50 percent corridor in 5.3 and 5.6.
4. The swap: finance committee under 3.3; fixed share of 60 percent inside 5.5.
5. Counterparties: three banks, all rated A-minus or better; the largest holds 37 percent of notional, under the 40 percent limit in 6.2.
The Program's Cost
The hedging program cost $308,700 in option premium this year. Forwards and the swap carry no upfront cost, though the forwards gave up any gain from a rising Australian dollar on 22.0 million. Froot et al. (1993) place the value of such a program in protecting planned investment from cash shortfalls, and this year's plan includes an $85 million plant. Firms that use currency derivatives have been found to trade at higher values than similar firms that do not, which suggests the market rewards a program of this kind (Allayannis & Weston, 2001).
What This Report Does Not Cover
Commodity exposure on steel and natural gas, handled through supplier contracts, and volume risk on Australian forecast sales are outside this report. Both affect cash flows and will be added to the measurement in the coming year.
One Exception, One Decision
The Brazilian development loan, 60 million reais or about $11.01 million, would breach the notes' 15 percent priority debt basket by about $2.28 million and therefore clause 10.1 of the policy. The committee is asked to approve the negotiating position in the Unit 9 brief: make a basket increase to 20 percent of net worth, or a carve-out of up to $15 million for the development loan, a condition of signing the notes. Without one of those changes, the plant must be funded through the parent, which would put a dollar-denominated debt on the books of a subsidiary that reports in reais.
References
Allayannis, G., & Weston, J. P. (2001). The use of foreign currency derivatives and firm market value. The Review of Financial Studies, 14(1), 243-276. https://doi.org/10.1093/rfs/14.1.243
Froot, K. A., Scharfstein, D. S., & Stein, J. C. (1993). Risk management: Coordinating corporate investment and financing policies. The Journal of Finance, 48(5), 1629-1658. https://doi.org/10.1111/j.1540-6261.1993.tb05123.x
Jorion, P. (1990). The exchange-rate exposure of U.S. multinationals. The Journal of Business, 63(3), 331-345. https://doi.org/10.1086/296510
Reading the GF 584 Unit 10 instructions
GF584 ends by asking for one report that sets out a company's whole risk management program. Open with a summary of what was measured, what was done and what remains, and name any decision needed. Build a residual table with one row per exposure and columns for the measured amount, response, cost, residual and review trigger. Explain why residuals are not added. Give each exposure a section in the same order, citing the earlier unit that produced its figure. Explain any exposure deliberately left unhedged, especially translation. Map every live position to the policy clause that authorized it, noting approval levels and counterparty limits. State the program's cost and what the report excludes. Close with any exception and the decision it requires. Cite research in APA 7.
Inside the GF584 Unit 10 example
A summary of what was measured, done and left opens the report. A four-row residual table follows, and a paragraph explains why its residuals are not summed. The highlighted sentence notes that the unhedged motor clause now carries more risk than the Australian sales. Sections step down the Australian figure, explain the won clause's two possible responses and justify reporting translation without a hedge, citing Jorion. Floating debt after the swap is covered. A governance section maps five positions to policy clauses, including the put counted at its delta. A section on cost cites Froot and colleagues and Allayannis and Weston. Exclusions follow, and the report closes with the basket exception and the negotiating position the committee is asked to approve.
Reading the GF584 Unit 10 grading rubric
Graders of the final GF584 report look for a residual table that carries correct figures from earlier units and a clear explanation of why residuals are not added. The largest share of points goes to integration: each exposure section consistent with its source unit, deliberate decisions not to hedge explained, and every position mapped to its authorizing policy clause. Identifying the largest remaining risk and directing attention to it shows judgment. Instructors in the MS in Finance program value a governance section that checks approval levels and counterparty limits, and an exception presented with the decision it needs. Research on hedging and firm value cited in APA 7 completes this capstone's rubric.
Common GF584 Unit 10 mistakes, and how to avoid them
Many final GF584 reports list hedges without stating what remains, so the committee cannot see the residual. Others add translation exposure to cash residuals, producing a total that describes nothing. Unhedged exposures are omitted instead of explained. Figures from earlier units are reworked inconsistently. The governance check is skipped, so positions outside policy go unnoticed. For any company your course follows, keep the report's order: summary and decision, residual table, one section per exposure, unhedged items explained, governance mapping, cost, exclusions and the exception with its decision.
Get a GF584 Unit 10 example written to your instructions
Findings from each earlier unit, plus the final assignment's wording and rubric, supply the custom report. It measures each exposure in consistent units, states the cost and residual of every response and maps positions to policy, with any exception flagged for a decision; delivery is 24-48h, and the first report is free. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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GF584 Unit 10 questions, answered
Should translation exposure be added to the other residuals?
No. Translation changes the reported value of net assets and flows through other comprehensive income, while the other residuals describe possible changes in cash. Adding them produces a total that means nothing. Show translation in its own row, explain what, if anything, it could affect, such as a covenant or a ratio, and keep totals to like measures.
How should the report treat an exposure that was not hedged?
As a decision, not an omission. State the measured amount, why no instrument was used, whether because of cost, uncertainty or a natural offset, and the condition under which the choice would be revisited. A board reading the report needs to know the exposure was seen and accepted rather than overlooked.
How much of the earlier work should appear in the final report?
Results and references rather than repetition. Carry forward each measured figure, the response and its cost, citing the unit or appendix where the calculation lives. Where a later decision changed an earlier figure, update it and say so. The report's value lies in the combined view, which is lost if earlier papers are pasted in whole.
Where can I find a free GF584 Unit 10 sample paper?
This page carries a full GF584 Unit 10 risk management report for a grain dryer maker, with a residual table, four exposure sections, a governance mapping, one exception and APA 7 references.
Why is translation exposure reported but not hedged?
It changes reported equity, not cash, unless the subsidiary pays dividends or is sold, and its one covenant link moves the other way, since a weaker real narrows the basket shortfall.