Foreign Exchange Risk Management

Foreign Exchange Risk Management involves strategies to protect businesses and investors from losses due to fluctuations in currency exchange rates. When companies operate internationally, they deal with multiple currencies, which can change in value unexpectedly. This can affect profits or costs. To manage this risk, organizations use techniques like hedging, which may involve financial instruments such as options or forward contracts. By anticipating currency movements and using these tools, they aim to secure their financial outcomes and minimize potential adverse effects on their operations and profitability.