Economic exposure is concerned with the long tem effects of forex movements on the firms ability to compete and add value. These effects are very difficult to estimate in advance and therefore the hedging techniques involving forward contracts futures and options are of limited use (Arnold, G. p1185. 2005)

1. a) Describe and critically analysis the methods that UK firms are using to manage economic exposure. Indicate why hedging techniques such as forwards, futures and options are inappropriate

2. b) Discuss any internal hedging techniques that can be used to compliment the management of economic exposure