Risk management through derivatives (a case study of JK timber impex private limited)

There is always an element of risk inherent in the transactions of one country with the rest of the world. Foreign exchange risl< which arises due to unanticipated movement in the currency exchange rate is the most commonrisl(associated with enterprises. Exposure to exchange rate volatility in the market can have a significant impact on the revenue flows of the corporate; it has been found that many corporate entities still do not make proper use of the various risk management tools available to them. Thanks to Liberalization and Globalization the Indian economy has been developing by leaps and bounds. In the recent past, increasing currency volatility in the Indian market created a great demand for a better risk management system. This has created the need for proper risk management through derivative products. However, a majority of the Indian corporate sector in general and Software Companies in particular are not giving due importance to foreign exchange risk. Hence, the purpose of this study is to examine the role of derivatives in managing the foreign exchange risk in JK Timber Impex Private Limited so that the company can hedge the foreign exchange risk that, in turn, improves the profitability position.