Northern Textiles Limited (A)

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Abstract

Northern Textiles (NTL) used highly complex derivatives to hedge its currency risk, and these structured products have been profitable in the past. But in 2008, unanticipated movements in exchange rates have led to serious losses. Seth, the Chairman of NTL, has come to know about the losses on a specific deal, but the Treasurer has ensured that he is the only person who understands the derivative book in its entirety. Though Seth is not aware of how grave the problem is, he realizes that he must review NTL's risk management policies and perhaps even replace the CFO.

Additional Information

Product Type Case
Reference No. F&A0559
Title Northern Textiles Limited (A)
Pages 21
Published on Oct 27, 2020
Year of Event 2008
Authors Varma, Jayanth R; Ghosh, Rahul;
Area Finance and Accounting (F&A)
Discipline Finance
Sector Manufacturing
Learning Objective Evaluate the risks of complex derivatives products. Understand the control issues in a treasury which is run as a profit centre.
Keywords Risk Management; Foreign Exchange; Derivatives; Structured Products
Country India
Organization Nothern Textiles
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