A Study on the Risks and Coping Strategies of Multinational

Corporations in an Uncertain International Macro-Environment:

An Analysis Based on Typical Cases

Peida Li

School of Accounting, Anhui University of Finance and Economics, Bengbu, 233030, China

Keywords: Multinational Corporations, Exchange Rate Risk, Trade Policy Risk, Risk Transmission Mechanism.

Abstract: In the context of anti-globalization and geopolitical conflicts, multinational corporations face complex risks

and challenges from exchange rates, trade policies, and geopolitics. This paper aims to deconstruct the logic

of these three risk transmission channels and develop a response strategy. The study reveals that exchange

rate risks require the coordination of financial instruments and dynamic hedging, trade policy risks depend on

decentralized supply chain design, and geopolitical risks necessitate pre-emptive assessments and phased exit

strategies. The innovation lies in constructing a 'macro-meso-micro' transmission model, extending supply

chain resilience theory to the realm of policy risks. It is recommended that companies establish a 'perception-

integration-reconstruction' dynamic response mechanism, which includes: (1) adopting a basket currency

pricing system of 50% Euro + 30% Pound + 20% RMB; (2) retaining 30% of net profits as a risk buffer pool

for subsidiaries in high-volatility regions; (3) employing a phased divestment model (reducing holdings by

30% during the warning period and by 50% during the conflict period) to provide decision-making references

for global operations.

1 INTRODUCTION

1.1 Research Background

The current global economic landscape is profoundly

transformed, with anti-globalization affecting

international business in the form of trade protection

and supply chain regionalization. The growth rate of

global merchandise trade declines to 2.4% in 2023,

1.8 percentage points lower than the pre-2019

average, as U.S. tariffs on $300 billion of China's

commodities continue, and the European Union's

CBAM increases the cost of compliance for the

manufacturing sector. The normalization of

geopolitical conflicts exacerbates the complexity of

the macro environment. The Russia-Ukraine conflict

has not only led to dramatic one-day fluctuations of

35% in the price of Brent crude oil in 2022, but has

also triggered a chain reaction - U.S.-European

sanctions against Russia have prompted more than

300 multinationals to withdraw from the Russian

market, with cumulative asset impairments exceeding

$200 billion. The spike in energy prices was further

transmitted to the manufacturing sector, with an

Italian tire company forced to shut down three

factories and lay off 2,500 workers as the cost of

natural rubber rose by 38%. Monetary policy

uncertainty is also impacting the financial stability of

multinationals. The Federal Reserve has raised

interest rates by a cumulative 425 basis points since

2022, while the Bank of Japan has maintained a

negative interest rate policy, resulting in a 25%

fluctuation in the US dollar index in 2022. This

currency mismatch increased the exchange loss of

multinational enterprises by 63% year-on-year, and

the financial report of a South Korean electronics

company showed that its translation loss due to the

depreciation of the Korean won against the U.S.

dollar in that year was as high as KRW 1.8 trillion.

The compound uncertainty of the macro environment

has impacted the traditional risk management

framework, and a new response system needs to be

constructed.

1.2 Research Purpose

This study analyzes the logic of triple risk

transmission through typical cases: in terms of

252

Li, P.

A Study on the Risks and Coping Strategies of Multinational Corporations in an Uncertain International Macro-Environment: An Analysis Based on Typical Cases.

DOI: 10.5220/0014350300004718

Paper published under CC license (CC BY-NC-ND 4.0)

In Proceedings of the 2nd International Conference on Engineering Management, Information Technology and Intelligence (EMITI 2025), pages 252-258

ISBN: 978-989-758-792-4

exchange rate risk, it explores the depreciation of

emerging market currencies due to the depletion of

corporate cash flow under the background of the Fed's

interest rate hike, e.g., a subsidiary of a German

enterprise will see its cash flow costs increase by 27%

in 2022 due to a 44% depreciation of the lira; in terms

of trade policy risk, it explores the impact of the U.S.-

Mexico-Canada Agreement (USMCA) on the

industrial layout caused by the rules of origin leading

to supply chain adjustment, such as Apple in order to

comply with the localization ratio of 62.5%, the parts

from China to Mexico 15%, bringing 1.2% of

logistics costs accounted for 3.2% increase in sales;

geopolitical risks to parse the sanctions of the second-

order transmission, such as the SWIFT culling led to

the extension of the development of the Black Sea oil

field of the French enterprises for 2 years, the

opportunity cost of more than 5 billion U.S. dollars.

The company also refined its response strategies and

formed a replicable methodology.

1.3 Research Significance

Theoretical level: In the existing literature on

international business, basically the research of a

single risk, few studies on the risk response

mechanism under the influence of monetary policy in

the coupling of anti-globalization and geopolitical

conflict, in this paper, we build a system of “macro-

medium-micro”, and apply the supply chain

resilience theory to the new field of policy risk. In this

paper, we build a “macro-mid-micro” system and

apply the theory of supply chain resilience to the new

field of policy risk.

2 THEORETICAL

FOUNDATIONS AND

LITERATURE REVIEW

2.1 Theoretical Framework for Risk

Management in Transnational

Corporations

2.1.1 Risk Identification and Classification

Based on traditional risk management theory

(Williams et al., 1998), the core risks of multinational

corporations are divided into three categories:

exchange rate risk manifests itself in the form of

currency fluctuations that erode cash flow, such as the

9% one-day depreciation of the British pound in

2022, which resulted in the loss of £1.2 billion in

revenue for British firms; trade policy risk manifests

itself in the form of tariffs and sudden changes in

compliance, such as the European Union's “Chip

Act”, which requires that local production capacity

account for 20% of production capacity in 2030.

Trade policy risk is reflected in sudden changes in

tariffs and compliance, such as the EU Chip Act,

which requires a 20% share of local production

capacity in 2030, forcing TSMC to adjust its plans to

build factories in Europe; geopolitical risk covers

non-market factors such as sanctions, such as the

U.S.-European embargo on Iran, which will cause the

cost of crude oil for Japanese firms to rise 18% in

2023.

2.1.2 Risk Transmission Mechanisms

The core risks of multinational corporations can be

identified into three categories: exchange rate risk

manifests itself in the erosion of cash flow due to

currency fluctuations, such as the 9% one-day

depreciation of the pound against the dollar in 2022,

which led to a loss of 1.2 billion pounds in the

translation of a British company's overseas revenues;

trade policy risk manifests itself in the impact of

sudden changes in tariff barriers and compliance

requirements, for example, the European Union's

“Chip Act” requires that local production capacity

account for 20% of production capacity in 2030,

forcing TSMC to adjust its European plant plans;

geopolitical risk covers the impact of non-market

factors such as sanctions and regional conflicts.

Geopolitical risk covers the impact of sanctions,

regional conflicts and other non-market factors, such

as the U.S.-European oil embargo on Iran in 2023,

which will cause the crude oil procurement cost of a

Japanese trading company to rise by 18%.

The transmission of macro-environmental risks to

micro-operations of enterprises is centered on the

ability of resource reorganization: Huawei realizes

the dynamic allocation of financial resources by

reconstructing its settlement currency portfolio (the

proportion of US dollars has been reduced from 70%

to 40%), and Foxconn completes the integration of its

supply chain by reconstructing its purchasing center

in Mexico due to the USMCA policy, and this kind of

“Sense-Consolidate-Reconfigure” mechanism can

enable the enterprise to achieve the best results in the

US Federal Reserve. This “Sense - Integrate -

Reconfigure” mechanism allows companies to reduce

risk shocks by 30%-50% by adjusting hedging tools

and capital structure under scenarios such as Fed

interest rate hikes (Boeing, 2022). Cases of chain

transmission of macro risks show that: the Russian-

A Study on the Risks and Coping Strategies of Multinational Corporations in an Uncertain International Macro-Environment: An Analysis

Based on Typical Cases

253

Ukrainian war limited Russian oil and gas exports, the

price of Brent oil exceeded $120/barrel, a German

company shut down three factories due to raw

material costs, quarterly profits fell by 45%, the

market value of 22 billion euros; the U.S. anti-

dumping tax on Chinese photovoltaic companies to

turn to Southeast Asia, triggering Vietnam's

overcapacity and price wars, a South Korean

company was forced to withdraw from the market in

2022, the cost of such risks to multinational

enterprises as a percentage of revenue (Boeing,

2022). The cost of such risks for multinationals

increased by 7.3% of revenue (World Bank data). The

“macro-medium-micro” model is validated in the

case of yen depreciation in 2022: the yen depreciates

by 23% against the US dollar (macro), and the

coefficient of exchange rate exposure of the

automotive industry is 0.65 (medium), which

ultimately leads to Toyota's overseas revenue loss of

1.2 trillion yen (micro), confirming the validity of the

model (Toyota, 2022).

2.2 Domestic and International

Research Status

Among the core risks faced by transnational

corporations (TNCs), research on exchange rate,

trade policy and geopolitical risk has formed a

systematic framework, providing theoretical and

practical support for enterprise risk management.

2.2.1 Exchange Rate Risk: Synergies

Between Financial and Operational

Hedging

Exchange rate volatility has always been a key issue

in exchange rate risk management for multinational

enterprises.TaekHoKwon et al. (2025) argued that a

single financial hedge (forward contracts, foreign

exchange options) can only lock in the exchange rate

for a limited period of time to reduce the exchange

loss, but it cannot solve the impact of exchange rate

changes on the competitiveness of the enterprise's

market; and the operational hedge (adjusting the

product structure, pricing strategy, etc.), although it

can improve the enterprise's ability to resist risk to

some extent, it also has the limitations of slower

results, higher costs and other limitations. While

operation hedging (adjusting product structure, price

strategy, etc.), although to a certain extent it can

improve the enterprise's ability to resist risks, it also

has the limitations of slower effect and higher cost.

Wang Shao (2022) argues that firms using a single

financial instrument are not immune to unexpected

changes in exchange rates. Orange Huang (2020)

demonstrates through a case study that firms that

combine short-term countermeasures with financial

instruments and long-term adjustments to operating

policies (e.g., shifting product mix to countries with

depreciating currencies) can reduce losses from

exchange rate risks by 40-60%, greatly improving

risk resilience.

2.2.2 Trade Policy Risk: an Application of

Supply Chain Resilience Theory

The impact of trade policy changes on supply chains

has become more and more significant in the context

of rising global trade protectionism. Jin Xiaocui et al.

(2025) show that policy fluctuations such as tariff

adjustments and trade barriers increase compliance

costs and operational risks for enterprises. Li Wen

(2024) suggests that resilient supply chains can

quickly adjust their networks to maintain operations

under policy shocks by diversifying supplier layouts

and enhancing information sharing, etc. Qi Zhang et

al. (2025) find that multinational automotive

companies reduce their reliance on regions with high

trade friction by increasing parts sourcing from

emerging markets, reducing the production disruption

time under trade policy shocks by 30%-50% and

effectively safeguarding the production of their

products under trade policy shocks. 30%-50%,

effectively guaranteeing supply chain stability.

2.2.3 Geopolitical Risk: Assessment Models

and Quantitative Studies

Geopolitical risk has a profound impact on the

investment and production of multinational

enterprises.Shiguang Peng et al. (2025) point out that

geopolitical conflicts can lead to energy supply

disruptions and price fluctuations, threatening the

survival of energy importing enterprises; Chen Min

(2025) reveals the complex transmission mechanism

of geopolitical risk by analyzing the impact of

geopolitical risk on the international gold price. Hu

Fang et al. (2023) constructed a “Belt and Road” geo-

risk assessment system from the dimensions of

political stability and military conflicts, and Wu

Menghan (2025) confirmed that this type of model

can help enterprises to prejudge the risks and adjust

their strategies (e.g., scaling down investments in

high-risk areas and strengthening cooperation

between government and enterprises). In addition,

Wang Xu et al. (2022) quantitatively analyze the

linkage between geo risk and economic policy

uncertainty on exchange rate by using DAG-SVAR

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model, which provides a quantitative basis for

corporate financial decision-making.

2.3 Research Gaps

Previous scholars have put forward relatively

systematic theories based on responses to single risks

(e.g., exchange rate risk, trade policy risk, or

geopolitical risk), but there are not many

corresponding theoretical modeling studies in the

context of anti-globalization and geopolitical

conflicts, monetary policy uncertainty, and the cross-

cutting impact of risks. Most of the previous studies

by scholars are unilateral studies on one risk

transmission channel, but there is no study on the

portrayal of the nonlinear interaction mechanism of

multiple risks (e.g., “geo-monetary-policy”) in the

cross-cutting scenario, and there is a lack of

quantitative modeling of the multiple risk

transmission channels; the proposed coping strategies

are unilateral; and the proposed coping strategies are

unilateral, and the proposed coping strategies are

unilateral. There is also a lack of quantitative models

of multi-risk transmission channels; the proposed

response strategies are single, and in the cross-cutting

scenarios, the response strategies are ineffective in

conflict with the environment, and there is a lack of a

synergistic multi-strategy “financial instruments,

supply chain, and political relations” response

framework; there is a lack of a unified cross-industry

response framework, and the quantification of the

dynamic response mechanism is still far behind the

practical requirements. The quantification of dynamic

response mechanisms is still far from being able to

keep up with the requirements of practice.

3 TYPES OF CORE RISKS AND

TYPICAL CASE STUDIES OF

MULTINATIONAL

CORPORATIONS

3.1 Exchange Rate Risk: Huawei's

Response to US-China Trade

Friction as an Example

3.1.1 Risk Characteristics

In Q1 2018, the US dollar index reached 95.5, the

Federal Reserve started the interest rate hike process,

and the elasticity of the US dollar exchange rate

against the Chinese yuan increased to more than 5%,

and 49% of Huawei's overseas sales were in the risk

zone; in Q2, changes in the exchange rate shortened

Huawei's pricing cycle for overseas sales to 10 days,

and some European users stopped their orders

because they were unable to predict the magnitude of

the price fluctuation, and the main supplier proposed

to settle their orders with the US dollar settlement,

suppliers raised prices by 5%-8% after the exchange

rate rose, which led to loss of control of the supply

chain; Q3-Q4, Huawei adopted a multi-currency

settlement portfolio strategy, in which the proportion

of US dollar settlement was reduced from 70% to

40%, with the exchange rate ratio at around 35%, and

at the same time utilized foreign exchange forwards

to hedge 60% of the expected cash flow, and the

decline in exchange losses in Q3 was 38% lower than

that of the previous quarter, Q2. The amount of

exchange loss decreased by 38%. Huawei faces the

risk of losses and profits from two-way movements in

exchange rates, and profits while being affected by

the supply chain.

3.1.2 Case Analysis

From the perspective of theoretical application,

according to the “real options theory” (Trigeorgis,

1996), Huawei's multi-currency settlement practice is

actually to retain the “right to choose to switch the

settlement currency”, when the value of the RMB

against the US dollar depreciation of more than 3% to

implement the euro settlement terms, such an option

design for the company to save about 230 million US

dollars in potential losses, which is the embodiment

of the role of real options for dynamic risk

management. When the value of the RMB depreciates

by more than 3% against the USD, the Euro

settlement clause is implemented, and such an option

design saves the company about 230 million USD in

potential losses, which is the embodiment of the role

of real options in dynamic risk management. In

addition, as mentioned in the IMF (2019) report, the

internationalization of the RMB has pushed the

proportion of RMB settlements in cross-border trade

from 2.3% in 2015 to 4.1% in 2019, and Huawei's

choice to implement the “RMB+EUR” mixed-

currency-denominated settlement method in Europe

caters to this trend, which helps to Avoid excessive

dependence on the dollar system [15]. Specific

conduction process can be understood as a result of

the appreciation of the dollar brought about by

exchange rate fluctuations make the export quotation

system failure, resulting in the price of raw materials

as the supplier of the dollar price pricing so that they

have more say in the ability to make Huawei's gross

profit from 32% to 27.5% of the proportion, thus

A Study on the Risks and Coping Strategies of Multinational Corporations in an Uncertain International Macro-Environment: An Analysis

Based on Typical Cases

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appearing in the phenomenon of cost control

dissonance.

3.2 Trade Policy Risks: Responding to

Sudden Policy Changes for

Foxconn's Mexico Plant

3.2.1 Risk Characteristics

In 2014-2016, Foxconn relied on the NAFTA

framework to build five new factories in Mexico,

planning to undertake 30% of the U.S. market for

consumer electronics orders, with an initial

investment of $7 billion, and a supply chain

localization rate of about 35%; in May 2017, the U.S.

proposed to amend NAFTA, released the draft U.S.-

Mexico-Canada Agreement (USMCA), requiring

62.5% of auto parts to be produced from North

America, and the electronic component supply chain

is included in the scope of regulation; July 2017 -

2020, Foxconn was forced to build 3 new local

sourcing centers in Mexico, shift 15% of parts

sourcing from China to Mexico, increase R&D

investment by 25% (~US$1.8bn), and lengthen

Mexican factory start-up cycle from 2 to 5 years, with

the market capitalization falling by 32% in 2018

compared to the period before the policy was

announced. Risks in this case are characterized by

escalating tariff barriers, rule of origin adjustments

and supply chain trust destruction.

3.2.2 Case Analysis

Hendricks & Singhal's (2005) empirical study

concludes that on average supply chain disruptions

cause a 40% drop in a company's market

capitalization, and Foxconn's 32% loss in company

market capitalization due to policy surprises, while

slightly below the average, combined with the $8.5

billion increase in Foxconn's adjustment costs for the

period of 2017-2020, the actual loss has been

significantly higher than the industry average. Due to

the USMCA rules of origin, Chinese-assembled spare

parts in Foxconn's Mexican plants have been reduced

from 65% to 50%, and domestic suppliers in Mexico

do not have manufacturing capacity, so the capacity

utilization of Foxconn's Mexican plants in 2018-2019

is only 68% of the designed capacity, and order

delays have grown from 13% to 22%, illustrating the

fact that Trade policy adjustments affect supply chain

performance.

3.3 Geopolitical Risk: BP's Investment

Cycle and Political Gaming in

Russia

3.3.1 Risk Characteristics

In the cooperation period (1997-2013), BP held 20%

of Rosneft through a joint venture, and received

dividends of $1.8 billion from Rosneft in 2013,

accounting for 15% of the net profit of that year, with

a cumulative investment of more than $20 billion; in

the conflict period (2014-2017), the U.S. and Europe

imposed financial sanctions on Russia in the

aftermath of the Crimean incident in 2014 In the

conflict period (2014-2017), after the Crimea incident

in 2014, the financial sanctions imposed by the

United States and Europe on Russia, the valuation of

BP's stake in Rosneft shrunk by $4 billion, and since

2015, BP has been unable to obtain the license for the

development of oil fields in the Russian Arctic, and

the exploration investment has been wasted to the

tune of $2.7 billion; in the withdrawal period (2018),

BP sold its entire stake for $5.5 billion, which

represents a loss of 70% compared with the valuation

of 2013, whereas if BP had sold 20% of its stake in

the early stages of the sanctions in 2014, which was

valued at about $4 billion, it could have reduced its

potential loss by 70%. In this case, the risk is

characterized by suddenness and volatility. The risks

in this case are characterized by sudden conflict,

sanctions transmission and asset freeze risk.

3.3.2 Case Analysis

This paper proposes a “staged divestment model” that

divides geopolitical risk into early warning period

(when policy signals appear), conflict period (when

sanctions are implemented), and deterioration period

(when assets are frozen), and suggests that firms

should reduce their holdings of risky assets by 30%

in the early warning period and 50% in the conflict

period. In the case of BP, for example, the

implementation of the model in 2014 could have

avoided losses of about $11 billion. bP attempted to

defend its rights and interests through legal

proceedings in 2014-2017, but Article 48 of Russia's

Law on Foreign Investments gives the government

absolute power to conduct “national security

reviews,” which reflects an asymmetric conflict

between business interests and state sovereignty. The

conflict between commercial interests and state

sovereignty is asymmetric.

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4 CONSTRUCTION OF RISK

RESPONSE STRATEGY

SYSTEM FOR

MULTINATIONAL

CORPORATIONS

4.1 Financial Hedging Strategies

Multinational enterprises should choose a hedging

combination of “forward trading + options trading +

currency swaps”, which, in principle, should achieve

a risk hedging ratio of more than 50%. The ultimate

form of hedging is the combination of buying FX call

options (strike +/-2%) and selling deflated put

options, which reduces the hedging expense by 30%

and covers nearly 60% of the exchange rate

movement in the whole range of exchange rate

changes. For example, an automobile manufacturer

could write down a foreign exchange loss of $42

million in 2023 by utilizing “50% forwards + 30% FX

options”.

The dynamic adjustment mechanism requires a

volatility threshold: when a major currency pair

fluctuates by more than ±3% (e.g., the pound

depreciates by 9% in a single day in 2022), the smart

contract automatically raises the forward contract

coverage from 50% to 70% and initiates a currency

swap to convert 30% of the debt-denominated

currency. An electronics company applied this

mechanism in 2023 and reduced its risk exposure by

55%; the system can automatically increase option

positions by 10%-15% before nodes such as the

Federal Reserve's interest rate resolution, improving

response speed.

4.2 Operation Optimization Strategy

A strategy of pricing in a basket of currencies, such

as EUR/GBP, in the European market can

significantly reduce US dollar dependence. After a

chemical company adjusted the pricing currency of its

products in Europe to “50% EUR + 30% GBP + 20%

CNY”, the impact coefficient of US dollar exchange

rate fluctuations on its European revenue in 2023

decreased from 0.72 to 0.31. IMF (2023) data shows

that multinational enterprises adopting basket-

currency pricing have 40-60% lower exchange rate

risk sensitivity than US dollar pricing enterprises,

which is consistent with the effect of Huawei's multi-

currency settlement practice in the European market.

IMF (2023) data shows that multinational companies

using basket currency pricing have 40-60% lower

exchange rate risk sensitivity than dollar pricing

companies, which is consistent with Huawei's

practice of multi-currency settlement in the European

market.

A buffer pool of exchange rate volatility risk can

be generated by retaining 30% of profits from

subsidiaries in highly volatile countries or regions.

For example, for Turkish lira volatility, one of the

group's manufacturers requires its subsidiaries in

Turkey to retain 30% of net profits (US$25 million)

each year, and when the Turkish lira depreciates by

44% against the US dollar in 2022, the retained

profits are used to compensate for rising supply chain

costs, reducing the group's ultimate loss by 28%. This

retained profit mechanism needs to be used on the

basis of the cash flow matching principle, e.g. in

South East Asian markets, where subsidiaries need to

retain profits in local currencies and need to invest in

short-term, low-risk assets so that they can be quickly

converted to working capital in the event of exchange

rate fluctuations (based on the notion of liquidity

reserves in Wen Li's (2024) theory of supply chain

resilience).

5 CONCLUSION

In the context of anti-globalization and geopolitical

conflicts, transnational corporations (TNCs) are faced

with the compound risk challenges of exchange rate,

trade policy and geopolitics. This paper aims to

deconstruct the logic of triple risk transmission and

construct a response system.

The study finds that: in terms of exchange rate

risk, the use of combined financial instruments and

dynamic hedging strategy can play a certain leveling

effect of volatility; in terms of trade policy risk,

supply chain de-concentration can strengthen the

ability of enterprises to absorb their risk sensitivity;

in terms of geopolitical risk, the use of ex-ante

assessment model and stepwise divestment plan can

further reduce the risk of unanticipated conflicts.

Meanwhile, this paper does not cover emerging risk

areas such as digital economy, and the constructed

model does not consider the universality of the

application, on the basis of which ESG risk,

technology blockade and other issues can be further

studied to develop real-time risk early warning model

led by AI.

Future research can focus on the risk of cross-

border flow of data in the digital economy and

explore the AI-driven real-time risk early warning

model; pay attention to new issues such as ESG risk

and technological embargo, and study the

construction of green supply chain resilience; and

A Study on the Risks and Coping Strategies of Multinational Corporations in an Uncertain International Macro-Environment: An Analysis

Based on Typical Cases

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deepen the quantitative analysis of the multi-risk

coupling mechanism, so as to improve the foresight

and accuracy of risk response strategies of

multinational enterprises.

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