Question

Corporations today are operating in an environment in which exchange rate changes may adversely affect their competitive positions in the marketplace. This situation, in turn, makes it necessary for many firms toa) carefully manage their exchange risk exposure.

b) carefully measure their exchange risk exposure.

c) both a) and b)

Answer 1

Answer:

C) Both a) and b)

Explanation:

Exchange rate risk is a type of risk which is now present in mostly the emerging or the developing countries. If a company is operating in an emerging economy and suddenly the local currency of that country depreciates than it can favor the company as the exports will now be more cheap than before and will give competitive advantage to that firm. The vice versa will happen when the currency appreciates.

Hence, it is now important for every company to carefully manage their exchange rate risk as well as measure the risk associated with that.

Thank You.