Abstract:
Companies in Indonesia like PT PLN may suffered losses caused by the
exchange rate. One of the reasons the company suffers a loss may not sufficient to
implement hedging for assets or liabilities in the form of foreign exchange. Thus,
the purpose of this study is to describe the way of hedging to reduce exchange rate
risk and avoid exchange rate losses for companies. This research uses qualitative
method with descriptive approach to process data which have been collected from
company financial report. Data obtained from field observation, documentation,
and analysis of exchange rate movements of PT PLN from 2011-2016. The results
will be compared with related theories of journals and books to formulate
solutions. The results of this research explain that it is better for companies like
PT PLN to implement hedging to reduce exchange rate risk that could harm
companies and countries. Currently the reason PT PLN may not implement the
hedging because assuming will reduce profits, even will increase the cost of
expenditure. In fact, by implementing a hedge will reduce the exchange rate risk,
although it will increase the cost of expenditure. The right solution to reduce
exchange rate risk by implementing a hedge stated by Indonesia (Bank Indonesia
Regulation). The Company may choose and use hedging instruments that it
believes are compatible with transactions or assets and liabilities
