Currency risk is the risk that business operations or the value of an investment will be affected by changes in exchange rates. As companies expand their participation in the global economy, it has become increasingly important to identify and assess the impact of currency risk. Exposure to currency risk can have adverse effects on income, cash flows or net worth. Fluctuations in exchange rates may arise as a result of business activities or operations in foreign markets, investment in securities which are issued by overseas entities, etc.
This tool describes risks associated to currency, identifies their root causes, and provides risk measurement information, management practices, and questions to consider.