1. Foreign Exchange Risk Dr Kishor Bhanushali www.ibmajor.wordpress.com

2. Introduction Business environment: Internal Environment and External Environment Ever-changing business environment and Risk Macro risk factors Business risk factors Risk: variability in operation variable

3. Foreign Exchange Exposure and Risk Business firm engaged in international transactions Dealing in foreign currencies Foreign exchange exposure and foreign exchange risk Increase in the volume of cross border transactions Trade and financial flows Transaction exposure: Accounting exposure Economic exposure Transaction exposure and Operating exposure

4. Management of Foreign Exchange Risk Assessing the extent of variability and identifying whether it is likely to be favorable or adverse Deciding whether to hedge or not all or part of the exposure Choosing the optimal hedging technique to suite the situation

5. Techniques for Hedging Transaction Risk Forward Hedge Future Hedge Money Market Hedge Currency Option Hedge Cross Hedging

6. Internal Hedging Strategies Leading and Legging : advancing and lagging in payment Currency diversification Risk Sharing Invoicing Netting and offsetting