General Remarks on the Assessment of Foreign Exchange Risk Exposure of Firms
12 Pages Posted: 14 Apr 2008
Date Written: 01-02-2008
The paper deals firstly with the assessment of nonfinancial firm's risk exposure which has been deeply affected in the last two decades by the trend of market globalization and increased competition. In this new scenario we can note the weakening of the traditional separation between risks voluntary accepted by the firm as a chance to improve its profitability and risks which unavoidably lay on the overall business activity of the firm itself and have to be adequately covered by means of risk management. Secondly, within the frame of financial risks, particular attention is given to exchange rate fluctuations and to issues dealing with measurement and analysis of qualitative as well as quantitative aspects of foreign exchange risks affecting nonfinancial firms and chiefly those extensively involved in international activities. The focus then shifts to the assessment of foreign currency risk exposure by the firm as well as to managing foreign exchange risks and to the instruments and techniques involved.
Keywords: risk exposure, financial risk, foreign exchange risk, risk management
JEL Classification: G30, G28, G32
Suggested Citation: Suggested Citation