Currency risk arises when receipts, payments or funding obligations depend on exchange rates that may change. The assessment should begin with the amounts and timing of the business's actual exposures rather than a forecast of which currency will rise.
Map committed and expected flows by currency and date. Distinguish operating exposure from a speculative position. Check whether receipts and payments offset each other in practice, including differences in timing and the certainty of each flow.
Compare available responses such as contract terms, matching flows and appropriately reviewed hedging arrangements. Understand fees, collateral, settlement obligations and the effect of cancellation before entering a financial instrument. A hedge can introduce obligations as well as reduce a defined exposure.
Test exchange-rate scenarios in the cash and margin forecast. Assign authority for hedging and monitor the position as orders change. Product suitability, accounting and regulatory treatment require assessment for the actual business and jurisdiction.
Open Sources Used
This page uses open and institutional references as a frame; the final decision still belongs to the company record, threshold and owner.
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Reading adjacent decision areas keeps the topic from becoming an isolated note.