Exchange Risk Exposure Management and the Significant Exporter

Abstract

Introduction Companies faced with saturated domestic markets have increasingly turned to potential overseas markets. However, international trading involves an additional risk as the firm is faced with foreign exchange exposures. Transactions exposure usually arises between setting the contract price and payment by the buyer or receipt of funds by the seller. A gain or loss, arising from an exchange rate change, is realised on currency conversion. Operating foreign exchange exposure relates to the potential impact on future costs, sales and earnings streams resulting from a change in real exchange rates, that is, deviations from the equilibrium path implied by the Purchasing Power Parity Theorem.

Citation

Javaid, M.I. (1985), "Exchange Risk Exposure Management and the Significant Exporter", Management Decision, Vol. 23 No. 2, pp. 43-51. https://doi.org/10.1108/eb001373