Renault is a French vehicle manufacturer producing cars, vans, buses, tractors, and trucks. The group is well known for its motor racing (through Renault Sport department), revolutionary designs (for example: Vel Satis, Avantime, Megane) and concepts (namely the Espace, the first monospace to be developed). Renault distributes its vehicles through primary networks (dealers, branches belonging to the Renault group's business distribution unit, approved repairers) and secondary distribution network (subdealsers). For a decade, Renault's growth strategy is mainly based on internationalization (outside Europe). Indeed, even if it is the leader on the European market, it needs to conquer the American and, above all, the Asiatic markets. That's why the group is present in "risky" countries such as Chile and Turkey. Besides, Renault holds 20.74 % of the capital of AB Volvo (Sweden), 44.3 % of Nissan (Japan), and 99 % of Dassia (Romania). Renault also created Renault Samsung Motors (South Korea) after buying Samsung Motors' operational assets, and has a partnerships with local companies in Russia (Avtoframos), China (Dongfeng), Iran (Idro), Columbia (SOFASA) and Italia (Fiat).
[...] Renault estimated that a appreciation of the €euro against sterling without hedging would have a negative impact of million on operation margin Financial results Foreign exchange risk can have a huge impact on financial results Impact on share in the net income of associated companies Without hedging, according to Volvo's and Nissan's financial contributions to Renault in 2006, a appreciation of the €euro : - against the Japanese yen would have lessened Nissan's contribution to Renault's income by millions - against the Swedish krona would have lessened Volvo's contribution to Renault's income by million Impact on shareholders' equity and net financial debt. [...]
[...] Concerning cash management, Renault's Corporate treasury department has developed two entities specialized in the centralization of cash flows (Société Financière et Foncière) and capital market trading after intra- Group netting (forex, fixed-income securities, short-term investments through Renault Finance) Different types of risk that Renault has been exposed to Renault is exposed to different risks which can have consequences on its financial performance. These risks can be divided in five different types : - operational - financial - legal - bank customer - dispute Let's present and discuss them. [...]
[...] Let's analyze these two types of risks in question Analysis of the tools adopted in risk management by your company Renault has developed risk management, which aims at anticipating and controlling the risks arising from its activities and international development. As a consequence, the group has to analyze the operational and financial risks, and to decide on action plans to avoid risks Operational risks Geographical risks In order to minimize geographical risks related to Renault's international growth outside Europe, the group has diversified its risks by being present both in risky/non risky countries. [...]
[...] Commodity hedge decisions are made by a steering committed with the CFO and the executive vice president purchasing Analysis of the effectiveness of use of the hedging techniques with the derivatives Hedging techniques with the derivatives are used in the field of operational and financial risk management Derivatives and operational risk management Concerning operational risks, derivatives are used for supplier risks. Nevertheless, even if hedging techniques are used for geographical risk, no derivatives could be used Supplier risk Renault has to hedge its purchases since its purchases account is heavy. [...]
[...] In order to improve its geographical management risk, Renault has developed tools taking into account country risk premium, short-term liquidity risk, and intra-group financial flows Country risk premium Geographical risks are taken into account by demanding a higher rate of return for every new investment project in a country considered as The risk premium added to the standard rate of return is determined by the financial market and macroeconomic indicators Short-term liquidity risk By monitoring liquidity risk, Renault can adjust its subsidiaries financing policy according to the situation in each country, and the financial datas Intra-group financial flows A finance and invoicing system is used to centralize management of financial risks Product quality risks The organization put in place by Renault aims at limiting the number of cars dangerous to use. [...]
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