Pharmacuetical Co (6/09) – ethical issue on hedging position

Hi,

The 3rd part of the question is about the issue on a senior member of the treasury taking substantial hedging positions.

So I get it’s about protection against translation risk.

Now a suggested solution states that the translation risk cannot be hedged against. If that’s the case why did the senior member even go for taking hedge positions? I thought the whole point of hedging is to protect against translation risk.

Why does the solution state that translation cannot be hedged against?

Also it says that translation risk doesnt result to cash flow movement. Is this referring to unrealized gains and losses?

Thanks.