Financial Risk Management at Mitsubishi Corporation
| Case Code: FINA017 Case Length: 16 Pages Period: 2003 Pub Date: 2003 Teaching Note: Not Available |
Price: Rs.500 Organization: Mitsubishi Corporation Industry: Trading Countries: Japan Themes: Banking and Financial Management, Microfinance |
Abstract Case Intro 1 Excerpts
Excerpts
Background Note
Yataro Iwasaki's close ties to the Japanese government ensured the success of his shipping and trading company, Mitsubishi. Founded in 1870, Mitsubishi diversified into mining (1873), banking (1885), and shipbuilding (1887). During the next decade, it invested in Japanese railroads and property. In 1918 the Mitsubishi zaibatsu (conglomerate) spun off its central management arm, Mitsubishi Trading (the forerunner of Mitsubishi Corporation). By WWII the group was a huge amalgam of divisions and public companies. During the war, it made warplanes, ships, explosives, and beer. The zaibatsu were dissolved by US occupation forces, and Mitsubishi was split into 139 entities. After the occupation ended, the Japanese government encouraged many of the former business groups to reunite around the old zaibatsu banks...
Overview of Risk Management
In the normal course of business, Mitsubishi and its subsidiaries were exposed to market risks due to changes in interest rates, foreign exchange rates, and commodity and equity prices. To manage the exposures to these risks, the group companies generally identified their net exposures and took advantage of natural offsets...
Market Risk
Foreign Currency Risk
Foreign currency fluctuations created both translation risk and transaction risk.
Translation Risk
The Group's reporting currency was the Japanese yen. Foreign subsidiaries prepared financial statements in their reporting currencies, which were then translated to Japanese yen prior to consolidation...
Financial Instruments: Accounting & Valuation
The parent company and some subsidiaries used derivative financial instruments as a part of their trading activities. The companies clearly distinguished derivatives used in trading activities from derivatives used for risk management purposes...
Exhibits
Exhibit I: Mitsubishi: Financial Highlights
Exhibit II: Mitsubishi: Exchange Rates into US Currency
Exhibit III: Mitsubishi: Cashflows
Exhibit IV: Mitsubishi: Additional Cashflow Information
Exhibit V: Mitsubishi: Short-Term Debt
Exhibit VI: Mitsubishi: Consolidated Net Income vs. Risk Capital
Exhibit VII: Mitsubishi: Doubtful Receivables
Exhibit VIII: Mitsubishi: Carrying Amounts and Estimated Fair values of Financial Instruments
Exhibit IX: Mitsubishi: Long-Term Debt
Exhibit X:Mitsubishi: Annual Maturities of Long-term Debt
Annexure A: Accounting for Financial Instruments under US GAAP
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