Running a business is associated with some risks that increase when a company operates internationally. Sending and receiving payments globally, investing abroad implies using foreign currencies, the exchange rates of which fluctuate under the influence of various factors. The risk of encountering losses while conducting cross-border transactions requires a company's financial managers to understand the types of such risk as well as the ways of how to mitigate them.

Read the articles and then answer the questions below:

• Foreign Currency Risk and Its Management https://www.accaglobal.com/hk/en/student/exam-support-resources/fundamentals-exams-study-resources/f9/technical-articles/forex.html
• Foreign Exchange Risk https://corporatefinanceinstitute.com/resources/knowledge/finance/foreign-exchange-risk/

1. Explain briefly and simply what exchange rate risk is. How does this influence a company's performance?

1. What are the three main categories of foreign exchange risk? Provide examples of each of the types of this risk.

1. How can foreign exchange risk be mitigated? Provide at least three examples of methods of hedging foreign exchange risk.

Answer rating: 100% (QA)

Exchange rate risk also known as foreign exchange risk is the risk that a company faces due to fluctuations in exchange rates when conducting international transactions This risk arises because the va... View the full answer