Ghosn was a shrewd manager nurtured at Michelin and Renault. Notably, he had extensive proficiency in operations management. This made him the best candidate to reverse Nissan fortunes since the entity central was in operations. Consequently, Ghosn instituted measures aimed at streamlining the operations of the entity thus shielding Nissan from international fiscal risk.
Ghosn began terminating the operations of certain plants. The closure of five depots reduced the entity cost extensively (Business week, 2004. This undertaking denotes the basic strategy utilized in streamlining an entity finances. This measure influenced constructively on Nissan’s stock. Investors interpreted the closure as a step towards prudent management that previously lacked. The prior management had a perception that Nissan could not fail despite the evident financial rot.
Additionally, they displayed reluctance to undertake decisive action that would culminate in layoffs. Thus, the entity adopted a path that culminated in liquidity hurdles. Nonetheless, Ghosn adopted ruthless measures that barred the financial rot from spiralling to catastrophic levels. Nissan depended sizeably on the financial sector to finance considerable proportion of its core operations. As such, the entity has enormous liabilities. Debt represents one of the countless means that entities adopt in financing their operation.
However, debt escalates an entity’s risk levels. Debt rendered Nissan’s stocks unattractive to investors hence, poor returns in the exchange market. Overall, Ghosn commenced a rethinking of Nissan overall financial strategy (Nissan-global, 2011). Japan automobile sector benefits from the weak yen comparative to other denominations like the Euro and the dollar. Ghosn distributes production in and out of Japan. Moreover, the entity began ordering sizeable quantity of its components from other states.
This shrewd move allows the entity to utilize the cheaper option when there is instability in worth of key denominations. This means that Nissan switches to foreign production when the yen gains worth. Conversely, the entity boosts local production when the yen weaken. This represents a shrewd option of managing financial risk that fundamentally entails variation in a currency’s worth (Takahashi, 2011).
Ghosn changed the product portfolio of the entity fundamentally subsequently redefining the philosophy. Nissan’s models generated minimal returns due to poor artisanship. This was unacceptable to Ghosn, an engineer and a keen logistician. Hence, Ghosn pioneered the development of model that embraced the fundamental requirements of the clientele and the environment.
As such, Ghosn redefined the entity philosophy, which is the initial phase of risk management. Evidently, the entity identified the uncertainty in its revenue owing to the volatility of the legal tender. Evidently, Nissan faced substantial risks and Ghosn mitigated this by establishing foreign depots and terminating the operation of the inefficient once in Japan. The above details disclose that Nissan adopted the second and third phases of controlling financial risk.
The entity adopted the fourth step since Ghosn stipulated the strategies that would facilitate management of financial uncertainty. This is a vital aspect of adoption of the fourth phase. The consequent phase reflects the measures adopted in the previous juncture. Nonetheless, this juncture stipulates precisely the action required to diminish financial uncertainty to acceptable levels.
Nissan commenced by diminishing the proportion of debt in its capital. Consequently, value of its stock improved due to prudence as the entity paid minimal interest required to service any liability. Visibly, the entity failed to embrace the seven and sixth phase of the Napoli procedure of controlling financial uncertainty. Fundamentally, the two phases skipped entails evaluation hedging adopted. Finally, the terminal stage assesses the accomplishment of the measure instituted to manage financial risk. In sum, Ghosn management enabled Nissan to realize it fiscal aspiration thus reversing its fortunes (Napalo, 2005).
References
Business week. (2004). Nissan’s boss Carlos Ghosn saved Japan’s No. 2 carmaker. now he’s taking on the world.
Napalo, D. (2005). Managing FX risk: An eight-step plan to establish a corporate foreign exchange policy.
Nissan-global. (2011). Toward a new chapter in automotive history.
Takahashi, Y. (2011). Nissan CEO highlights yen turmoil. Web.