Acer 2007 Annual Report Download - page 113

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110
8.2 Important Notices for Risk
Management and Evaluation
8.2.1 Impact of Interest Rate, Exchange
Rate and Inflation on Company’s P&L and
Future Strategy
Interest Rate Fluctuation
During 2007, the U.S. interest rates remained
at around 5.25% betw een Jan uar y and
August. From September, the U.S. Federal
Reserve Board began to cut interest rates -
reaching 4.25% in December - to ease the
sub-prime mortgage crisis. This did not
impact on Acer as the company does not
own medium- or long-term liabilities in U.S.
currency.
The New Taiwan (NT) dollar interest rate
remained low; therefore, there was minor
impact on the cost of our loans. Acer ’s
short-term investment tool is the US dollar
time deposit; while medium to long-term
investments include money market funds and
time deposits in NT dollars.
It is expected that the U.S. Federal Reserve
Board may continue to cut interest rates in
2008, while there will only be minor interest
rate adjustments to the NT dollar. Acer will
reduce its loans in NT dollar gradually,
thereby also decreasing interest-related
expenses.
Foreign Exchange Rate
The Euro is the major foreign currency
exposure by Acer. In response to the high
fluctuation of Euro/US dollar exchange rates
in 2007, Acer adopted a conservative hedging
strategy. Despite this safety measure, Acer’s
foreign exchange investment ended with loss.
The Euro exchange rate – currently at a
record high – is advantageous for Acer in
terms of cost, but the Company will keep to a
consistent strategy and aggressively hedge its
foreign exchange to reduce impacts on profit
and loss resulting from currency fluctuation.
Inflation
Price hikes of oil and materials did not hurt
Acer as the Company had increased its stocks
and adjusted prices accordingly.
The price of oil and materials is expected
to remain high this year. Should material
price lead to a cost increase, Acer shall act
accordingly to avoid loss.
8.2.2 How Corporate Image Change
Affects the Company’s Risk Management
Mechanism
The Company had split off its manufacturing
division at the end of year 2000 in order
to focus on the design and marketing of
IT products and services. The potential
crises within manufacturing and marketing
com pan ies a re very d iff e ren t, an d th e
Company’s crisis management now focuses
on our global supply-chain and logistics.
By outsourcing our manufacturing sector to
multiple vendors and suppliers, the Company
gained greater flexibility in inventory control