Foreign exchange risk management and financial performance of import firms in Nakawa Urban Council.

Abstract

The objective of the study was to establish the effect of foreign exchange risk management on performance of import firms. The study employed a case study design and sampled a total of 59 Import firms out of the 70 imp01i firms that were targeted under KACITA in Nakawa Urban Council. The study employed a questionnaire as a major tool for data collection and data was analysed using SPSS as a tool for analysis. Correlation was made using Pearson correlation to obtain the results. The study found out that foreign exchange rate risk management has a positive impact on profitability, market share and the total sales volume of imp011 firn1s. There is evidence of significantly positive linear relationship between foreign exchange risk management, and performance of import firms. A p-value 0.005<0.05 indicates that there is a correlation between foreign risk identification and the performance of import firms. The p-value 0.045<0.05 implies that there is a correlation .between foreign exchange risk measurement and profitability, sales volume and market share hence firms' performance. The p-value 0.03<0.05 means that there exists a strong relationship between foreign exchange risk mitigation measures and performance of import firm; The study also found out that majority of the import firms that were sample respond to foreign exchange risk with a risk management policy plan, often use forwards, futures, money market contracts, options and swaps for hedging in the order of merit.