Discuss CIPS L5M2 Exam Topic 5 Question 64

Juan is a Spanish business owner who imports several parts from Japan. Juan's business operates in Euros and the parts that he buys from Japan can often take a long time to arrive, this means that the price of the items sometimes fluctuates due to the exchange rate. Which of the following would be the best option for Juan?

Ahave the supplier quote in their own currency

Bhave the supplier quote in Juan's currency

Chave the supplier match geographical profiles of customer sales with supplier purchases

Dterminate the contract with the foreign supplier

Suggested Answer: B

quoting in Juan's currency would reduce the risk to Juan - the risk of currency exchange rate fluctuations would then sit with the supplier. See p.23 for more information on currency risks.

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29 comments · newest first

Elenore 7 months ago

Terminating the contract is too drastic. Stick with B!

Pansy 7 months ago

Option C seems complicated. Not sure it helps Juan.

Ming 7 months ago

True, but option A could lead to more uncertainty.

Blair 8 months ago

But what if the exchange rate changes?

Dominque 8 months ago

Agreed, quoting in Euros helps with budgeting.

Linn 8 months ago

Not sure if option C is practical for Juan's situation.

Mohammad 9 months ago

Fluctuating prices can really hurt profit margins.

Darell 9 months ago

Wait, why would he terminate the contract? Seems drastic!

Geraldine 9 months ago

Option B makes the most sense to avoid exchange rate issues.

Xenia 9 months ago

Option C is interesting, but it might be too complex for Juan's business. B is the way to go.

Shannon 9 months ago

Haha, terminating the contract with the foreign supplier? That's a bit extreme, don't you think?

Jospeh 9 months ago

I agree, having the supplier quote in Juan's currency is the most practical solution.

Merlyn 10 months ago

I’m not confident, but I think terminating the contract might be too drastic unless the supplier is really unreliable.

Michel 10 months ago

This question reminds me of a similar practice one where we talked about currency risk management. I feel like option B could be a safer choice for Juan.

Jade 10 months ago

Terminating the contract with the foreign supplier (option D) seems a bit drastic. There must be a way for Ahmed to manage the exchange rate risk without having to completely change suppliers. I think options A or B would be better solutions.

Ahmed 10 months ago

I would definitely go with option B. Quoting in my own currency gives me more control and stability over the pricing of the parts I need to import. The exchange rate fluctuations can be a real headache, so this seems like the best way to avoid that.

Macy 10 months ago

Option C sounds interesting, but I'm not sure how that would work in practice. Matching geographical profiles of customer sales with supplier purchases seems like it could be complicated to implement.

Giovanna 10 months ago

Option B seems like the best choice. That way Juan can better manage the exchange rate risk.

Emeline 11 months ago

I remember discussing how quoting in the supplier's currency could expose Juan to more exchange rate risk, but I'm not entirely sure if that's the best option.

Marya 11 months ago

I think option B is best. It reduces risk.

Barbra 11 months ago

I think having the supplier quote in Juan's currency might help stabilize costs, but I can't recall if there are any downsides to that approach.

Clorinda 11 months ago

I disagree, quoting in their currency could save costs.

Wei 11 months ago

I'm a bit confused by this question. It seems like there are a few different strategies Juan could use to manage the exchange rate risk. I'm not sure which one would be the "best" option.

Lenita 12 months ago

I think option B would be the best choice for Juan. Having the supplier quote in his own currency would help him better manage the exchange rate risk and avoid fluctuations in the price of the parts.

Raul 6 months ago

↳ replying to Lenita

True, but I still think B is safer.

Lasandra 6 months ago

↳ replying to Lenita

Then option A could be a backup plan.

Caitlin 7 months ago

↳ replying to Lenita

But what if the supplier refuses?

Francesco 7 months ago

↳ replying to Lenita

Definitely! It simplifies budgeting.

Raylene 7 months ago

↳ replying to Lenita

I agree, option B makes sense.

CIPS L5M2 Exam - Topic 5 Question 64 Discussion