Foreign exchange and risk management

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The Foreign exchange market is a place where individuals and institutes buy and sell foreign currencies, the purpose of the foreign exchange market is to permit transfer purchasing power denominated in one currency to another. The major participants of the Foreign exchange market are banks, importers, exporters, investors and tourists. Foreign exchange risk can affect businesses big or small to global enterprises.

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Presentation Transcript

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WELCOME TO MYFOREXEYE

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Foreign Exchange and Risk Management The Foreign exchange market is a place where individuals and institutes buy and sell foreign currencies, the purpose of the foreign exchange market is to permit transfer purchasing power denominated in one currency to another. The major participants of the Foreign exchange market are banks, importers, exporters, investors and tourists. Foreign exchange risk can affect businesses big or small to global enterprises. Changes in exchange rates can impact the value of your company’s assets and liabilities and also overall profitability. Foreign exchange volatility is unpredictable since there are so many factors that affect the movement of the Foreign exchange, economic fundamental, monetary policy, fiscal policy, global economy, speculation, domestic and foreign political issues are few of the factors.

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The foreign exchange and risk management exposure may be classified under three broad categories . Transactional Risk is primarily associated with imports and exports due to undertaking transactions in a currency apart from your local currency, transaction risk is the risk of an exchange rate changing between the transaction date and final settlement date, this can result in a gain or loss at the conversion stage. The degree of exposure depends upon size of the transaction; the time period before the expected cash flows occurs and anticipated volatility of the exchange rates . Translational Risk is a major threat if your organisation is conducting business in foreign markets, translation risk occurs when your company has any assets and liabilities denominated in a foreign currency which may shift in value due to changes in exchange rate. Operating exposure is caused by unexpected changes in exchange rates on your company’s future cash flows from foreign operations. Affecting both revenues and operating expenses, economic exposure can be difficult to manage through hedging strategies as it deals with unanticipated changes in forex rates.

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CONTACT US Myforexeye Fintech Pvt. Ltd Plot 135, Pocket 1 Jasola Vihar New Delhi 110025

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Thank you

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