14 Economic exposure. Laurette SA is a French wholesale company that imports expensive highquality luggage and sells it to retail stores around Europe. Its main competitors also import high-quality luggage and sell it to retail stores. None of these competitors hedge their exposure to exchange rate movements. The treasurer of Laurette told the board of directors that the firm’s performance would be more volatile over time if it hedged its exchange rate exposure. How could a firm’s cash flows be more stable as a result of such high exposure to exchange rate fluctuations?