| Course | BU 436 Global Project Management and Sustainable Practices |
|---|---|
| Unit | Unit 7 |
| Paper type | Currency and financial risk |
| Length | About 930 words, 6 pages |
| Format | APA 7 student paper |
| School | Herzing University |
| Program | BS in Project Management |
| Updated | September 2026 |
Free sample paper for BU 436 Unit 7
A Ten Percent Move Costs More Than the Contingency: Currency and Financial Risk for a Composite Solar Cold Room Project Paying in Pesos, Rupees and Shillings From a Dollar Grant
Student Name
Business, Herzing University
BU 436: Global Project Management and Sustainable Practices
Instructor Name
April 8, 2026
A Ten Percent Move Costs More Than the Contingency: Currency and Financial Risk for a Composite Solar Cold Room Project Paying in Pesos, Rupees and Shillings From a Dollar Grant
Where Money Crosses a Border
Brightwell Cooling's project, a composite case in which 40 solar cold rooms are assembled in Mexico, programmed from India and installed in Kenya, is funded almost entirely in US dollars: a $1.5 million grant and $400,000 of Brightwell's own money, a $1.9 million budget with a $95,000 contingency. Most of its costs are not in dollars. The assembly contract is priced in Mexican pesos, the software contract in Indian rupees and the installation partner's work and local costs in Kenyan shillings. After the project, the cooperatives' lease payments arrive in shillings. Each mismatch between the currency of a cost and the currency of the money paying for it is an exposure, and this analysis identifies each one, sizes it against the budget and attaches a response a project manager could carry out.
The exchange rates used are planning rates set in March 2026 for budgeting: 18.0 pesos, 85 rupees and 129 shillings to the dollar. They are assumptions of the composite case, not market quotations, and the analysis tests what happens if each moves 10 percent against the project.
The Exposures
The table lists every place where the project holds a cost or a receipt in one currency and its funding in another.
| Exposure | Amount in local currency | Dollar value at planning rate | When it settles | Effect of a 10% adverse move |
|---|---|---|---|---|
| Assembly contract | 14.4 million pesos | $800,000 | 30% June 1, 40% September 1, 30% December 15 | About $88,900 more |
| Software contract | 14.9 million rupees | $175,000 | Monthly, April to December | About $19,400 more |
| Installation and local costs | 32.3 million shillings | $250,000 | Monthly invoices, June to January | About $27,800 more |
| Cooperative leases (after the project) | 43.2 million shillings over five years | About $334,900 | Monthly, from each installation date | About $30,400 less |
| Panels, batteries, compressors, Columbus staff | In dollars | $675,000 | Various | None |
About $1.2 million, nearly two thirds of the budget, is spent in currencies other than the dollar. An adverse move in the peso, rupee and shilling together, each by 10 percent, would raise costs by about $136,000, well above the $95,000 contingency. Moves of that size within a year are not unusual for these currencies; the Kenyan shilling, for example, lost roughly a fifth of its value against the dollar during 2023 before recovering much of it in 2024. The project cannot treat currency as something the contingency will absorb.
Madura (2018) distinguishes transaction exposure, the risk on known future payments, from economic exposure, the longer-run effect of rates on a business's value. The three cost lines are transaction exposures with known amounts and dates, which makes them manageable. The lease income is closer to an economic exposure: it runs for years, and its dollar value depends on the shilling's path long after the project closes.
Responses
The peso exposure is the largest and has fixed dates, so it is hedged. Brightwell will buy pesos forward for the September and December milestones, 70 percent of the contract, through its bank at the time the assembly contract is signed. Because Mexican interest rates are higher than US rates, forward rates for buying pesos are somewhat more favorable than the spot rate, so the hedge is expected to cost little beyond the bank's margin. The June milestone is paid at the spot rate on the day the grant's second tranche is converted. Shapiro and Hanouna (2019) note that a forward contract fixes the cost of a known foreign currency payment at the cost of giving up any gain if the rate moves favorably, which the project accepts because its goal is a predictable budget, not a trading profit.
The rupee exposure is small and spread across monthly payments, so it is accepted and covered from contingency. The shilling cost exposure is handled by timing rather than contracts. Forward cover for shillings is available from Kenyan banks, but at wider spreads, and the exposure is moderate. Instead, grant dollars are converted to shillings monthly, matched to the installer's invoices, so that money is not held in shillings longer than needed and each conversion is small.
The lease income is left unhedged. It belongs to the business after the project and is too long-dated to cover efficiently. Brightwell will review lease prices each year in shillings, with any increase capped at 5 percent, so that cooperatives are protected from sudden rises while Brightwell recovers part of any depreciation. Bartram et al. (2010) found that firms reduce currency exposure mostly through pricing and operational choices rather than financial hedges alone, and the lease review is that kind of choice.
How the Exposures Will Be Watched
The finance controller in Columbus reports the three currencies in the monthly project report, showing the planning rate, the rate actually paid on each settlement and the difference in dollars. Two triggers are set in advance. If the rupee or the shilling moves more than 7 percent against its planning rate for two consecutive months, the controller recommends whether to extend forward cover to that currency for the remaining payments. If contingency drawn for currency reaches $50,000, the project manager reviews every other claim on contingency with the sponsor before approving new ones. Setting the triggers now, while no money has been lost, keeps the decision from being made in a hurry after a bad month.
What Remains
After the responses, a 10 percent adverse move in all three currencies would cost about $74,000: the unhedged June peso payment, about $26,700, the rupee exposure, about $19,400, and the shilling costs, about $27,800. That is within the $95,000 contingency, with about $21,000 left for non-currency risks. The hedge dates are also schedule items. If the September assembly milestone slips, the forward contract still settles on its date, and Brightwell will hold pesos it cannot yet pay out; the integrated plan must therefore treat a slip in the assembly milestones as a financial event as well as a schedule one. Brightwell, its partners and every rate and amount here are composites for this course.
References
Bartram, S. M., Brown, G. W., & Minton, B. A. (2010). Resolving the exposure puzzle: The many facets of exchange rate exposure. Journal of Financial Economics, 95(2), 148-173. https://doi.org/10.1016/j.jfineco.2009.09.002
Madura, J. (2018). International financial management (13th ed.). Cengage Learning.
Shapiro, A. C., & Hanouna, P. (2019). Multinational financial management (11th ed.). Wiley.
The Herzing BU 436 Unit 7 instructions
BU 436 Unit 7 asks students to identify and manage the financial risks created when a project's costs and funding are in different currencies. Common requirements include listing every exposure with its amount and timing, sizing it against the budget under a stated rate change, classifying exposures, and recommending responses such as forward contracts, natural hedges, pricing changes or acceptance. Many instructors ask students to state their exchange rate assumptions and whether hedging is recommended. The analysis should connect settlement dates to the project schedule. Composite rates are acceptable if labeled. A table of exposures and a clear statement of residual risk after responses are usually expected, supported by APA 7 discussion.
How the BU 436 Unit 7 example is put together
The paper opens with the funding and cost currencies and states its planning rates as composite assumptions. A table lists five exposures with local amounts, dollar values, settlement dates and the effect of a 10 percent adverse move. The following section totals the combined effect, compares it with contingency and distinguishes transaction from economic exposure. A responses section explains each choice: forwards for two peso milestones, acceptance of the rupee line, invoice-matched shilling conversions and an annual lease price review. A monitoring section sets two triggers in advance. The final section calculates the residual exposure after responses and explains why a slipped assembly milestone becomes a financial event.
BU 436 Unit 7 rubric: what full points look like
Currency risk rubrics at Herzing generally reward complete identification of exposures, accurate sizing, appropriate classification, practical responses and a clear residual position, with writing and sources. Identification earns full credit when every cost and receipt in a foreign currency is listed with timing. Sizing scores highest when the effect of a stated rate change is calculated and compared with the budget or contingency. Classification rewards distinguishing transaction and economic exposure. Instructors check that every response fits the size and timing of its exposure and is something a project manager could actually carry out, rather than a treasury strategy beyond the project's authority. The residual criterion pays for showing what risk remains after the responses and whether contingency covers it.
BU 436 Unit 7 help before you submit
Currency analyses often lose points by listing currencies without amounts or settlement dates, which makes sizing impossible. Another common problem is recommending hedges for everything, including small or long-dated exposures where cost outweighs benefit. Students frequently use real market rates without dating them, or present planning assumptions as forecasts. Some ignore the link between schedule slips and fixed hedge dates. Others never compare the combined exposure with contingency, missing the central question. Papers also confuse strengthening and weakening, reversing the direction of the risk. Finally, using an employer's actual payment terms and rates can disclose confidential commercial information that a labeled composite avoids.
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BU 436 Unit 7 questions, answered
What exchange rates should I use in the analysis?
Take a rate from a source you can name, write the date you took it, and treat it as a starting point rather than a fact about the future. Then work in movements: what a five or ten percent shift in either direction would do. Rates move constantly and vary by provider, so the scenario is the durable part of your paper and the quoted rate is not.
Should I recommend hedging?
You can describe options a company might consider and say which parts of the exposure they would address, framed as the kind of decision a finance function makes. What a course paper should not do is recommend an instrument as though advising a real business, since that is regulated territory and nobody should act on a graded document. Keep your own recommendations to the things a project manager controls: contract currency, payment timing, contingency.
Can I use our real payment terms and rates?
No. Terms negotiated in your employer's supplier contracts, the rates in them and the country operations data showing how each site settles are commercial material, and compliance filings sit in the same category. Build the budget from the assignment scenario and public rate sources you cite with dates. What you know about how invoices behave across borders can inform the analysis without any document coming with you.
Where can I find a free BU 436 Unit 7 sample paper?
The BU 436 Unit 7 currency and financial risk example appears above for free, with the exposure table, the hedging choices and margin notes. If your project uses other currencies, we can prepare a matching analysis for you free once we see the assignment, usually within two days.
Should BU 436 Unit 7 recommend hedging?
Only where it fits. The sample hedges the large, dated peso payments with forwards, accepts the small rupee exposure and manages shillings by timing conversions, because hedging every exposure would cost more than it protects.