SNH
INT-620 – Module 4
4-1 Discussion: Mitigating Transaction, Translation, and Economic Risks
I chose PepsiCo and they operate in over 200 countries and territories. It would be easier to list the
countries they do not do business in such as Russia since the war with Ukraine. Also PepsiCo does
limited business in places like Cuba, Syria, and Sudan.
PepsiCo uses derivatives and fixed price contracts to hedge commodity price fluctuations. They use
these tools to combat an increase in cost of goods in a very competitive market. Since PepsiCo does
business in over 200 countries and territories, there isn't just risk in fluctuations of commodity prices.
PepsiCo is also exposed to foreign exchange risk. Forward contracts usually with terms of no more than
two years are used by PepsiCo for their foreign exchange risk. PepsiCo also manages interest rate risk
with interest rate swaps. Their foreign exchange derivatives at December 31, 2023 was worth $3.8
billion while interest rate derivatives were worth $1.3 billion during the same time.
In my opinion I believe PepsiCo is doing enough to hedger their risk. PepsiCo is a huge global operation
with net revenues in 2023 totaling $91,471 million. Roughly 40% of their 2023 net revenue was outside
of North America and roughly 38% operating profit. If PepsiCo was not successful at hedging risk, I don't
believe they would be as profitable of a company.
References
PepsiCo. (2023). Fiscal Year 2023 Annual Financial Report. https://investor.pepsico.com/docs/default-
source/investors/q4-2023/q4-2023-form-10k_zcxmxniwggj6094l.pdf
