Question

What is operating exposure? How is it related to the other types of exposure?

Answer 1

Operating exposure as a type of foreign exchange exposure which is caused by effect of unexpected currency fluctuation and these exposures will be increasing when the foreign exchange volatility will be increasing and decreasing when it falls so these operating exposures can be mitigated either through operation strategy or currency risk mitigation strategies

Operating exposure is type of foreign exchange exposure which will be caused by the effect of unexpected currency fluctuations on future cash flow of the company and the foreign investment of the company so it can have a substantial impact on the market value since it is long-term in nature so company should be trying to hedge against unexpected currency fluctuation by investing into the foreign exchange trading.

it will also be impacting the transaction exposure and translation exposure but it is not easy to measure precisely and it is relatively difficult to hedge because it will be dealing with the unexpected changes but transaction exposure and translation exposure are mostly dealing with the expected changes and these operating exposure are also impacting the overall fluctuations of the profits and the earnings of the company like transaction as well as translation exposure so they are also impacting the overall exposure of the company and the foreign currency so they are linked to transaction exposure and translation exposure.