Assume you are a US manufacturer and expect to pay CAD 5,830,580 for raw materials in 3 months. However, you fear that your company will be adversely affected by the current economic environment in the US, Canada, and globally and wishes to hedge to reduce its risk related to exchange rate changes. Based on this scenario, please answer the following questions:

(a) Explain ONE financial risk faced by the US manufacturer faces in the above scenario, why you consider this as a risk, and whether you would consider hedging. Please discuss in your answer the outlook for the underlying variable and cite evidence of an adverse and/or favourable direction. NB: reference list will not be part of the word count. (b) For the risk you have mentioned above in part (a) please provide the hedging strategy you will use and explain why you have chosen this strategy above all others.