Currency Risk Management Techniques and its Utilization by SME Partners of Sectoral Foreign Trade Companies

Diversified markets and growing business opportunities, thanks to globalization, have urged firms to do business globally. Nevertheless, conditions in global competition require small and medium-sized enterprises (SMEs) to acquire necessary qualifications for survival. SMEs constitute a large proportion of Turkish economy with respect to such figures as quantity, production capacity, and recruiting. However, they face obstacles to overcome in issues especially related with management, finance, technology, productivity, and foreign trade. Thus, setting and acting in combined form organizations might be the best way for SMEs to prevail these difficulties. In this respect, sectoral foreign trade companies (SFTC) appear as a critical alternative in providing economies of scale in foreign trade to create synergic advantages so that these organizational forms are encouraged. Yet, foreign trade naturally involves in variety of currencies. This, in turn, leaves firms with currency risk due to exchange rate fluctuations. In this study, the use of currency risk management techniques to avoid risks created by exchange rate fluctuations is evaluated from the aspect of SMEs as partners of SFTCs