FINC20019 - Foreign Exchange Risk: Assessment for Business Finance

This presentation delves into the concept of foreign exchange risk, which arises from currency fluctuations impacting businesses operating both domestically and internationally. It highlights the vulnerability of currencies to these risks, emphasizing the need for robust risk management strategies. Effective risk management can be achieved through financial contracts like forwards and options, as well as operational mechanisms such as geographic diversification. The presentation references academic sources to support its analysis of terms-of-trade cycles, external adjustments, and the moderating effects of institutions on globalization's impact on growth, underscoring the importance of scenario analysis in estimating and mitigating foreign exchange risk.