Reference no: EM132599357

The following statement and table has been extracted from financial report of Atlas bank:

"Foreign exchange risk represents exposures to changes in the values of current holdings and future cash flowsdenominated in foreign currencies. The potential for loss arises from the process of revaluing foreign currencypositions in rupee terms. The Group's foreign exchange risk is presently limited to future cash flows in foreigncurrencies arising from foreign exchange transactions and translation of net open position in foreign currencies.The Group is carefully monitoring the net foreign currency exposure as well as utilizing the currency swap andforward contract to hedge the related exposure."

                                          Assets (Rs)                 Liabilities (Rs)                 Net foreign currency exposure(Rs)

United States Dollar            1,676,431                1,624,382                          52,049

Great Britain Pound                40,884                   73,931                     -33,047

Japanese Yen                        5,209                           0                           5209

Euro                                    51011                         98973                      -47962

Other currencies                         4489                         120                             4369

                                                1,778,024                     1,797,406                  -19,382

Required:

Question 1: Elaborate in detail that how Atlas bank is managing its foreign currency risk? You may use some hypothetical figures to illustrate your point. What is your opinion about the banks net foreign currency exposure?