Study On The Exchange Risk Management Based On The Control Theory

The tide of economic globalization rolled up the whole world in new century, the enterprise of each country whether active or passive are all participated in this tide inevitably. After China joining the WTO successfully, the enterprises of China face the impact of the tide more seriously than before. The enterprises are all anxious to introduce the talented person of the related multinational knowledge whether come out of the entrance of the country to develop the battlefield or guard firmly the local battlefield. The people's bank of China announced 'Reform on perfecting mechanism of exchange rate of RMB' on July 21 of 2005. Exchange rate of RMB doesn't nail its eyes on the US dollar only, but starts to implement the floating exchange rate system. This floating exchange rate system is manageable which took the market's supply and need as the foundation and took a basket of currencies as a reference. It means the exchange rate will fluctuate more frequently than before. Because the exchange rate effect the company's cash flow, assets, liabilities and usual operation greatly, the Chinese multinational enterprise are threaten by the foreign exchange risk. Under this background, the research of the foreign exchange risk seems to be realistic and important.The fact provides a new visual field and a new way of thinking doubtlessly that cybernetics is applied into the management of foreign exchange risks. Control is an essential element of cybernetics and the risk control is an important link of the management of foreign exchange risk. So control would be the link point between cybernetics and the foreign exchange risks. As for the mutual point, the application research of cybernetics on the foreign exchange risk not only is viable but also has superiority. In order to control the foreign exchange risk more effectively, we set up a closed cycle control system to manage the foreign exchange risk. This system is divided into four parts. First is identification part of the foreign exchange risk. Second is calculation part of the foreign exchange risk. Third is control part of the foreign exchange risk. And the last one is feedback part of the foreign exchange risk. The article elaborates the important link of the system, such as the control target of the foreign exchange risk, the inaccuracy and revised model of Parity of Purchasing Power (PPP), the selection of philosophic of the foreign exchange risk management, the financial engineering methods of evading the foreign exchange risk and the information feedback. After established the closed cycle control system, its effectiveness needs to be examined. The effectiveness is tested by the case of NOKIA carrying on the closed cycle control system at chapter 5. Some enlightening issues are induced for the foreign exchanges risk management of Chinese enterprises.Cybernetics is a research method that runs through the whole article. Through the method of synthesized summing up combined with the concrete analysis, the substantial evidence studies combined with normalized analysis, the model manifestation combined with the logic substantial evidences, 'systematic study combine with emphasis research, we can know that the closed cycle control system is valid for foreign exchange risk management of multinational corporation.