Financial risks of conducting international business
Can you please help with identifying what the financial risks of conducting business internationally is and also, explain the significance of foreign exchange rate risk and how this risk can be mitigated?
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The major financial risks of conducting business internationally are:
1) Foreign exchange risks: International businesses are heavily exposed to fluctuations in foreign exchange rates. Since the various phases of the transaction in international businesses do not happen at the same time and the exchange rates keeps on fluctuating, an adverse change in exchange rate can heavily affect a firm's revenue and profitability. For example, If a US company is exporting goods to Germany and expects to receive payment in Euros, any significant weakening of Euro ...
Solution Summary
The significance of foreign exchange risk is immense in international transactions and can expose firms on either side of the transaction adversely. This solution discusses the major financial risks of conducting business internationally in 354 words.