As a risk manager for XYZ corporation, you are assessing the firms various risk exposures to include in a regular semi-annual report to upper management.

XYZ is a medium-size import/export firm located in Cambridge, UK. Its primary sources for imports, which it sells in the UK and Eurozone, are located in China and Vietnam. It has customers throughout the world, but more than half of its exports go to Africa. XYZ customarily borrows to cover funds tied up in exports.

Further, XYZ has recently launched its own online B2B (Business-to-Business) platform.

Q1. Identify seven types of risk exposures you should report and provide a brief explanation for each risk exposure.

Q2. Suppose the firms board needs your views on the trade-off of hedging against the identified risks.

Briefly discuss what kind of value can be generated by risk hedging, when risk hedging is most likely to generate value and when it is least likely to do so.