Mr. Ahmed is the CEO of XYZ Company, a manufacturer and retailer of Omani Dishdasha brand. The company imports the raw material from countries like UAE, India and Bangladesh and then manufactures various types of Dishdasha and other dress materials (jeans, shirt, etc) for male customers. The target market for the firm is Oman. However, the sales manager of the firm Mr. Mohammed is insisting in entering other GCC market (like UAE, Saudi Arabia, Bahrain, Qatar and Kuwait) and Asian market (like India, Pakistan, Bangladesh, etc). Mohammed is optimistic about entering into GCC and Asian markets and is of the opinion that these markets will act as a sustainable growth model for the firm. The demand in the local Omani market is stagnant and competition has increased manifold. The finance manager of the firm Ms. Aisha is pessimistic about Asian market and is recommending entering only GCC market. One of her reservations for GCC market is that OMR is pegged with USD and so are other GCC currencies. This will reduce the currency exposure compared to other currencies. However, the HR manager Ms. Samia is averse for any foreign investments, as it will create various issues like requirement of new employees, a lot of capital expenditure and risk exposure in these foreign markets. Ms. Samia proposes to emphasize more on the local market and instead diversify the business portfolio within Oman. Mr. Ahmed has identified a UAE based firm Star LLC, a retailer of mens clothing brand. Following portions reflect the financial details.

Task 5: Defend the query raised by Ms. Aisha. Why currency risk is an important benchmark for businesses pursuing foreign trade.

Task 6: What are various assumptions and limitations of current rate and temporal rate of translation exposure. Which method is suitable for the given scenario?