The project evaluates the foreign exchange risk management process of an organisation. You need to identify an organisation that deals with foreign currency and is exposed to foreign currency risk....

1. Foreign Risk Management:
The risk of financial consequences due to changes in exchange rates is known as currency risk, also known as foreign exchange rate risk. Simply put, exchange rate risk is the possibility that changes in exchange rates will affect a company's operations or financial condition.
Many businesses will seek to manage their risk because they are exposed to currency risk, which means that fluctuations in exchange rates can affect their business. This page examines the various forms of currency risk and provides strategies for mitigating it.
Currency risk is the possibility that changes in exchange rates will affect the company's financial position or performance. There are three types of currency risk: transaction risk, economic risk and translation risk. Currency risk is a significant risk that importers, exporters and international businesses should be aware of.
2. Key Factors for Risk Management:
Hedging the transaction risk – internal techniques
Home currency Invoice
A simple solution is to cancel all payments foreign customers and all import payments from your company are processed by you native currency The risk associated with exchange rates was the only one transferred to the customer, it didn't go away.
Lagging and leading
The importer (payer) can try to do so defers payment, if he expects the money to lose value coming settlement or exceeding the credit limit, it is possible Exporter (receipt) you can try to get paid immediately. If you are waiting the currency to be received will depreciate over the next three periods months. This can be achieved in exchange for a discount fast payment.
Matching
A company can easily compare invoices and payments that are due at the same time and are in the same foreign country currency. The rest of all transactions are only required trading in currency markets. Open a bank account a foreign exchange is an extension of the concept of correspondence.
Hedging the transaction risk – external techniques
Forward contracts
The futures market is a place where you can buy and sell currencies at a fixed future price or forward exchange rate. The future therefore, the rate is essentially fixed.
Hedges Money market
The basic concept is exchange in the current location exchange rate to avoid uncertainty about future exchange rates. It worked depositing or borrowing foreign currency against actual cash flows from commercial transactions. Therefore, the future rate is essentially fixed.
Futures contracts
Futures are standard hedging instruments that are traded size. The purpose of a currency futures contract is to set the exchange rate at future time under the underlying risk condition.
Options
Ability to buy or sell currency at the subsequent strike price, it is called a currency option. The company...