Question

Describe the major exchange rate risk related factors that multinational businesses or corporations should consider when conducting business globally. (about 250 words)

Answer 1

EXCHANGE RATE RISK

      Foreign exchange risk is a financial risk which happens when a financial transaction is denominated in a currency other than the domestic currency of the company. Here one country may get dominated by the other currency of other country. So it will make a negative impact on the particular currency. This is also known as currency risk. Exchange rates affect the amount of money the investor actually sees at the end of the day, and this in turn determines what the investor return at the end. so the fluctuation in this exchange rate will saffect them in a worst matter.

  Foreign exchange risk occurs when the value of an investment fluctuates due to changes in a currency's exchange rate.When a domestic currency appreciates against a foreign currency, profit or returns earned in the foreign country will decrease. So this fluctuation is a kind of risk in foreign exchange. There is also political risk along with these exchange risk. The political risk is that when country suddenly change its policy or federal system for example a change in taxation etc, will leads to a problem for the international trade. These can be trade barriers which will affect the international trade. Tarrif and quota are used to reduce these kind of risk.

ThankYou...