Project 1

Running a business is associated with some risks that increase when a company operates internationally. Sending and receiving payments globally, investing abroad implies using foreign currencies, the exchange rates of which fluctuate under the influence of various factors. The risk of encountering losses while conducting cross-border transactions requires a companys financial managers to understand the types of such risk as well as the ways of how to mitigate them.

Explain in your own words what foreign exchange rate risk is. How does it influence a companys performance?

What are the three main categories of foreign exchange risk? Provide examples of each of the types of this risk.

How can foreign exchange risk be mitigated? Provide at least three examples of methods of hedging foreign exchange risk.

Submit your original responses in at least 3 paragraphs to Project 1 in Moodle.