Currency Risk Management

Currency risk is one of the treasury risks that affects almost all companies in one form or another. This spotlight quiz on currency risk management explores the various forms of transaction, translation and economic risk.

In a change of style this month each question includes a few introductory paragraphs explaining the circumstances where FX risk can arise and some of the issues arising. This narrative provides a brief reminder (or tuition) on the topic and then leads onto a question to help reinforce the points made and to trigger your own thinking.

Your company probably already has a formal policy on foreign currency risk which addresses most of the risks, however there are some more difficult areas like economic risk and the use of FX options which may well be worth revisiting to ensure they properly cover the company’s needs.