This research shall be against the background that, Ghana has gone through a lot of reforms in recent years. Ghana adopted the Economic Recovery Programme (ERP) in 1983 with so many reforms such as trade reform, exchange rate policy, fiscal and monetary policies et al. The trade liberalization reform involves reduction in import tariffs from high levels to a maximum 25 per cent as well as the abolition of the import licensing system. The liberalization allowed private sector to access raw materials and machinery without difficulty as was the case in the period of licensing. The introduction of competition encouraged local manufacturers to be cost effective and more quality conscious. Demand for foreign exchange to transact foreign exchange business therefore increased.
To facilitate the trade liberalization reform in terms of access to foreign currency, an exchange rate policy was also part of the several reforms carried out in the ERP which was modified to include structure adjacent programme in 1986.
The following revolutionaries' policies were carried out under the financial sector liberalization programme.
Forex bureaux which buy and retail foreign currency were allowed to operate in the early 1980's.
Mandatory minimum and maximum rates payable on bank deposits were abolished in 1987.
Minimum lending rate on bank loans were abolished in 1988
Promulgation of banking law 1992 and the banking Act in 2002 and the review in 2004
Mandatory lending of 20 per cent of loans to the agricultural sector was abolished in 1990 and Abolition of controls on international capital movements.
These policies set the tone for liberalised economy with the nation set to produce its first commercial oil by the end of 2010, more foreign transactions are expected and the impact of exchange rate risk on Ghanaian firms cannot be underestimated.
The ever growing foreign exchange rate trend tends to erode earnings and the operating efficiency of import/export dependent firms, to the extent that it threatens the liquidity and/or cash flow position of these companies.
SIGNIFICANCE OF THE STUDY
Primarily, the contribution by commerce in an economy cannot be overemphasized. The researcher deems it very necessary to investigate how foreign exchange risk is managed by Ghanaian firms. The researcher is optimistic that, the results of the study will contribute significantly towards the progress of companies that transact business in foreign currency. The results of the study can serve as a basis or benchmark for better policy planning to halt the volatility in exchange rates as well as proper management of foreign exchange risk. Additionally, the study can serve as a basis for further research into the causes of exchange rate volatility and its effects on earning and finance and how to minimize the effects. Nevertheless, the role of the study will only actualize or materialize when related personnel have access to the findings and recommendations of the researcher and implement or learn from the findings.
SCOPE AND LIMITATION OF THE STUDY
Drawing from the objectives and research question of the study, the researcher would seek to obtain information from 50-70 companies through the use of questionnaire. The nature of the research objectives and research questions will require that, the companies to be selected should be the ones whose inputs are obtained from foreign sources (imports/export). Companies located mainly in Accra and Tema (two major cities in Ghana) will be selected to form inputs for the production of finished goods, the sample of the study. It would be a cluster of companies that import finished goods for resale as well as inputs for the production of finished goods to be sold either locally or exported Due to time and resource limitation, the study will cover the period 2005-2009 the research would focus on management of foreign exchange risk
CHAPTER LAYOUT
The organization of the study will be a Chapter study, using the case study methodology approach. I hope to discuss in Chapter one the background to the problem as well as the statement of the problem. This chapter will also cover the objectives, importance of the problem and the organization of the study. Chapter two will include deliberation on the conceptual model an aid to theory, historical development of the foreign exchange market internationally and in Ghana; and an in-depth literature review and theoretical framework of foreign exchange risk Chapter three covers the methodology. This embraces the statistical model variables in the model, method of estimation and expected signs of the results data collected, problem encountered in the data collection, review of sampling techniques and data collection techniques. In chapter four will be the mode of data analysis. This covers the presentation and discussion of empirical result Chapter five covers summary, conclusion and implication of the study for the future.
METHODOLOGY
This Chapter presents the methodology employed to address the questions which motivated the study. It covers the population size; sample size; data collection techniques data collection procedures; data analysis procedures and the difficulty encountered in data collection. The justification for selections shall also be discussed as well.
DEFINITION AND SIZE OF POPULATION
According to Chisnall (1981), population is `any group of people or objects which are similar in one or more ways and which forms the subject of the study in a particular survey. The complete set of cases or group member Bryman (2007). It is the totality of cases that conform to some designated specification. Population may refer to the whole census of a country or in certain cases; it may refer to special section of the general population of a country, which is the case in this study. But in most cases, it may be practically impossible to cover the whole population if it is very large thus a sample is used as a representative of the population which in this study is described as all the importers and exporter (firms involve in foreign trades) in Ghana.
DETERMINATION OF SAMPLE SIZE
Sampling is said to be the selection, usually, of a limited number from a large group of population for testing and statistical treatment, on the assumption that the same may be as representative, for the particular purposes, of the whole group Bryman (2007). In order to see that the same size is representative of the population the use of purposive and stratified sampling shall be employed. The sample size is about 70- 50 international traders (importers/exporters of goods and services) and raw materials for production
SAMPLING TECHNIQUE
I the researcher shall employ two sampling techniques - purposive and stratified sampling technique. The purposive sampling techniques shall be used because; the information required is technical and professional in nature that could only be derived from the companies forming the sample. Recognizing that, the population may well contain different types of individual pith differing measures and ease of access, the experimental exercises shall be drawn in what I regard as a representative sample. This involves the elimination, anticipated sources of distortion, but there will always remain the distortions due to personal prejudices, or the lack of knowledge of certain crucial factors in the structure of the population. With stratified sampling, the sample shall be specially designed so that certain known characteristics of the population under the survey are represented in certain proportion .As such; it involves a random selection procedure within each of several strata or groupings of people.
CHOICE AND USE OF DATA COLLECTION METHOD
The research work shall be conducted based on primary and secondary sources of information gathered by the use of the following. In this study, I the researcher shall used questionnaire model to collect data from the respondents. This shall be based on the expectation that it will enable me the researcher to spend less time at the premises of the firms than interviews and other methods .One set of questionnaire shall be used and will be divided into two parts Part 1 seeks to gather information about the profile of the company while Part 2, will be specifically made to collect information out of the essence of the study. In administering the questionnaire, I the researcher shall send 70-50 copies to the targeted respondents and my junior Brother, a representative of the researcher will personally distribute all the copies of the questionnaires to the various respondents Later, he shall collect the answered questionnaires and forward them to me for my data analysis.
DATA ANALYSIS PROCEDURE
Data in this research work shall be analyzed using descriptive statistics and possibly regression analysis
ANTICIPATED PROBLEMS OF THE STUDY
The major problem I the researcher anticipate to face during the data collection exercise is non respondents; some of the respondents may be unwilling to cooperate as some may consider the information needed as a means of identifying their expected profits within which tax will be levied. Other may not respond at all, meaning some questions may be left unanswered. Equally the problem of finance which already will not allow I the researcher to travel back home for this exercise cannot be over-emphasize. This could make it difficult and unfeasible for me the researcher who had wished to conduct interview with some of the managers. The inter-marriage of academic work with the research work is already a problem. However, I the researcher shall seek to do my very best to get some information despite all these envisage problems
LITERATURE SOURCES AND REFRENCES
The following literatures have been found as a result of background reading and searching using the library stock of books on the above subject, exploring journal articles books and other sources. These are not exhaustive list as more shall be explore to enrich the review.
Belk, P.A. and Edelshain, D.J., 1997. Foreign exchange risk management - the paradox. Managerial Finance 23 7, pp. 5-24
Blin, J.M., Greenbaum, S.I., Jacobs, D.P., 1980. Flexible Exchange Rates and International Business. Washington DC, USA.
Buckley A, 2000 Multinational Finance 4th edition Pearson education prentice Hall
Collier, P.A., Davis, E.W., Coates, J.B. and Longden, S.G., 1992. Policies employed in the management of currency risk: case study analysis of US and UK. Managerial Finance 18 3/4, pp. 41-52
Copeland, T.E. and Joshi, Y., 1996. Why derivatives don't reduce FX risk. Risk Management 43 7, pp. 76-79
Cummins, J.D., Phillips, R.D. and Smith, S.D., 1998. The rise of risk management. Economic Review 83 1, pp. 15-21.
Dolde W., 1993. The trajectory of corporate financial risk management. Journal of Applied Corporate Finance 6 3, pp. 33-4
Duangploy, O. Bakay, V.H. and Belk, P.A., 1997. The management of foreign exchange risk in US multinational enterprises: an empirical investigation. Managerial Finance 23 7, pp. 85-100.
Glaum, M., 1990. Strategic management exchange rate risks. Long Range Planning 23 4, pp. 65-73.
Hakkarainen, A., Nathan, J., Eero, K. and Puttonnen, V., 1998. The foreign exchange exposure management practices of Finnish industrial firms. Journal of International Financial Management and Accounting 9 1, pp. 34-57.
Khoury, S. and Chan, K., 1988. Hedging foreign exchange risk: selecting the optimal tool. Midland Corporate Finance Journal (Winter), 40-52..
Kohn, K., 1990. Managing foreign exchange risk profitability. Columbia Journal of World Business 25, 203-207.
Madura J, 2000 International Financial Management 6th edition south western college
Marshal, A P. (1999 Foreign exchange risk management in UK, USA and Asia Pacific multinational companies
Rawls, S. and Smithson, C., 1990. Strategic risk management. Continental Bank Journal of Applied Corporate Finance, 6-18.
Rodriguez R.M., 1977. . Foreign-Exchange Management in US Multinationals Lexington Books, Toronto, Canada
Rodriguez, R.M., 1981. Corporate exchange rate risk management: theme and aberrations. Journal of Finance (May), 427-439..
Shapiro, A.C., 1998. . Foundations of Multinational Financial Management Prentice Hall, NJ, USA
Tran V.Q., 1980. . Foreign Exchange Management in Multinational Firms UMI Research Press, Michigan, USA.
ETHICS
I shall do my utmost best in the data collection so that it does not place me or others at risk, every effort shall be made to comply with the University's Ethical Guidelines. Participants will be informed before hand about the content of the questionnaire to avoid any distress, so as to ensure voluntary participation. The content of which shall be approved by my supervisor before hand. Participants shall also be allowed to withdraw at any stage. Confidentiality shall be maintained where participants want to hide their identities. Their identities shall be protected.
CONCLUSION
When I finished, my research shall attempt to answer the following:
I) How Ghanaian firms manage their foreign exchange risk;
II) The systems they use to curb the effect of foreign exchange risk;
III) The goals and objectives for managing foreign exchange risk; and
IV) The kind of problems they encounter in managing their foreign exchange risk.
