Financial Risk Management: Mitigating Currency Fluctuations in Global Supply Chains

Currencies fluctuations have emerged to be one of the most essential financial risks that impact companies in international supply chains. Volatility in exchange rate has a direct impact on the procurement costs, pricing strategies, supplier relationship, logistics planning and the overall operational efficiency. So, this study aims at looking at how currency fluctuations affect global supply chain performance and discussing how financial risk management practices can reduce the effects of currency fluctuations. This research is based on the Financial Risk Management Theory, Resource-Based View and Dynamic Capabilities Theories. This paper relies on a quantitative research design. The sample consisted of 71 professionals that were employed in the Pakistani companies engaged in global trade in supply chain, procurement, logistics, and finance areas. The data analyzed with Smart PLS software and Partial Least Squares Structural Equation Modelling (PLS-SEM) was employed. The results show that the currency fluctuation has negative significant effect on the global supply chain performance. The financial risk management practice has insignificant effects on supply chain performance. The results shows that financial risk management practice can’t moderate this relationship. This study suggest that companies need to shift to more organized, proactive and mature financial risk management systems to improve supply chain resilience.