MANAGEMENT

Detailed explanation-1: -Foreign exchange risk, also known as exchange rate risk, is the risk of financial impact due to exchange rate fluctuations. In simpler terms, foreign exchange risk is the risk that a business’ financial performance or financial position will be impacted by changes in the exchange rates between currencies.

Detailed explanation-2: -Currency risk, commonly referred to as exchange-rate risk, arises from the change in price of one currency in relation to another. Investors or companies that have assets or business operations across national borders are exposed to currency risk that may create unpredictable profits and losses.

Detailed explanation-3: -Examples of Currency Risk. The most obvious sort of currency risk is from foreign exchange losses. This happens when a company sells in a foreign market and then the value of the local currency there declines, or when a company buys in a foreign market and then the value of the local currency there rises.

Detailed explanation-4: -For example, if a company in Japan sells products to a company in the U.S. and the U.S.-based company has to convert dollars into Japanese yen to pay for the goods, the flow of dollars into yen would indicate demand for Japanese yen.