Currency Transfer Risk

Currency transfer risk, also known as exchange rate risk, is the chance that the value of a currency will change and impact international money transfers. For example, if a company in the U.S. agrees to pay a supplier in Europe, fluctuations in the euro-dollar exchange rate could make the payment more expensive or less costly than initially expected. This risk arises because currency values can fluctuate due to economic conditions, political events, or market sentiment, potentially affecting the cost or receipt of funds across borders. Managing this risk is important for international businesses to avoid unexpected financial losses.