Foreign exchange risks or risk is mainly about what happens
to the currency and how it affects companies that mainly have their core
business as exporting and importing, they usually face that type of risk since
sometimes unexpected changes happen to the currency that will affect their
business and will change the value of the business they are doing and that
might be negative or positive for the company depending on what happened in the
exchange rates between the currencies that are dealt with in the business.
There are other people who are affected by this type of risk too not just
organizations that export and import, those kinds of people are investors or in
other words international investors that will also put this risk into consideration
and consider the currencies he or she are dealing, and their values. There are
also many kinds of “Foreign currency exposures” like Transaction exposure,
Economic exposure, Translation exposure and Contingent exposure and usually
international companies use hedging plans to try to avoid the foreign exchange
risks expected by those organizations, because companies need to be noted that
ignoring such risk and not taking them under consideration carefully may put
their companies in a really critical situation where it may lead the company to
collapse completely.
Student Name: Rashed Buhumaid
Student ID: H00132143
Sources:
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