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Two not-for-profit organizations the Production and Operations Management Society (POMS) and the European Operations Management Association (EurOMA) are about to offer joint memberships for their respective group of members. Considering that these organizations collect membership fees in different currencies, they are wondering what would be the fairest approach for developing an exchange rate policy. Their alternatives include using different spot exchange rates, forward contracts or currency options.
This case has been designed to introduce students to the idea of currency rate hedges in the context of a not-for-profit organization. The case reinforces the following concepts: a) Currency exchange rate risk and how it affects not-for-profit organizations; b) Hedging tools such as spot exchange rates, forward contracts and currency options; c) Development of an appropriate hedging strategy.