[SOLVED] Brexit and Rolls-Roycel Rolls said it remains committed to the UK | SolutionInn
- If you were a member of the leadership team at Rolls-Royce, what would you recommend the company do to manage the risks arising from Brexit?
EXHIBIT A Currency Structure of Rolls-Royce's Global Business Rolls-Royce's business was structurally mismatched by currency. Although global sales were dominated by the U.S. dollar, costs were still largely British pound-based. US dollar sales-$ European euro sales- British pound sales 75% 20% 5% Rolls-Royce (United Kingdom) 10% 30% 60% US dollar costs $ European euro costs British pound costs The result was a multinational company that was long U.S. dollars and short British pounds. If the U.S. dollar then appreciated versus the British pound, Rolls-Royce benefits. If, however, the dollar was to fall in value versus the pound, sales, earnings, and cash flows would fall in value as reported in British pounds. EXHIBIT B Derivative Financial Instruments Related to Foreign Exchange Risks At December 31, 2015 Currencies Sold Forward Sterling US dollar Euro Other At December 31, 2014 Currencies Sold Forward Sterling US dollar Euro Other Sterling (millions of ) 0 18,869 2 131 Sterling (millions of ) 0 16,659 150 167 US dollars (millions of ) 383 0 76 12 429 0 Currencies Purchased Forward Euro (millions of ) 0 1,552 0 143 US dollars (millions of ) 61 9 Currencies Purchased Forward Euro Other (millions of ) 221 902 125 2 (millions of ) 0 2,014 0 114 Other (millions of ) 199 938 185 10 Total (millions of ) 604 21,323 203 288 Total (millions of ) 628 19,611 396 300 EXHIBIT C Long-Term Exchange Rates of the Dollar, Euro, and Pound Currency units = 1.00 GBP 2.20 2.00 1.80 1.60 1.40 1.20 1.00 Jan-94 Nov-94 Sep-95 96-inr www. May-97 Mar-98 Jan-99 mik Nov-99 Sep-00 Jul-01 USD = 1.00 GBP May-02 Mar-03 EUR = 1.00 GBP Jan-04 Sep-05 Nov-04 Jul-06 momen Jan-09 May-07 Mar-08 www Nov-09 Sep-10 Jul-11 May-12 Mar-13 Jan-14 Nov-14 Sep-15 Jul-16 EXHIBIT D U.S. Dollars per British Pound Sterling in 2016 (USD = 1.00 STG, daily) 1.50 1.45 1.40 1.35 1.30 1.25 1/4/2016 1/11/2016 1/18/2016 1/25/2016 2/1/2016 2/8/2016 2/15/2016 2/22/2016 2/29/2016 3/7/2016 3/14/2016 3/21/2016 Date June 23 June 24 Aug 9 3/28/2016 USD to = 1.00 GBP 1.4801 1.3633 1.3009 % Change -7.89% -12.11% 4/11/2016 4/18/2016 4/25/2016 5/2/2016 5/9/2016 5/16/2016 5/23/2016 4/4/2016 5/30/2016 MA 6/6/2016 6/13/2016 Brexit Vote (June 24) 6/20/2016 Manon 6/27/2016 7/4/2016 7/11/2016 7/18/2016 7/25/2016 8/1/2016 8/8/2016 Jun-2013 Jul-2013 Aug-2013 500 Sep-2013 Oct-2013 Nov-2013 Dec-2013 Jan-2014 Feb-2014 Mar-2014 Apr-2014 May-2014 Jun-2014 Jul-2014 Aug-2014 Sep-20141 Oct-2014 Nov-2014 Dec-20141 Jul-2015 Jan-2015 Feb-2015 Mar-2015 Apr-2015 May-2015 Jun-2015 Oct-2015 Aug-2015 Sep-2015 Feb-2016 600 Nov-2015 Dec-2015 Jan-2016 Mar-2016 Apr-2016 May-2016 Jun-2016 Jul-2016 Aug-20161 700 800 Brexit vote on June 24 900 Mu 1,000 1,100 1,200 1,300 GBP per share EXHIBIT Rolls-Royce Group plc Share Price (June 3-August 2016) Step by Step Solution
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There are 3 Steps involved in it 1 Structural Currency Mismatch RollsRoyce has continued to bear this currency mismatch due to Complexity and Cost Moving manufacturing is costly and c... View full answer Get step-by-step solutions from verified subject matter experts