Do currency risk management strategies work?

But these tactics don’t work for every currency risk—and companies often face far greater exposure from less obvious risks that are much more difficult to manage, including risk that stems from mismatches between costs and investments in one currency and revenues in another.

Why is currency risk important?

Understanding currency risk is essential for businesses and investors involved in international trade or investments, as proper management can help minimize potential losses and enhance profitability. What are the different types of currency risk that businesses and investors should be aware of?

How do investors manage currency risk?

Shareholders are well aware of the currency risks faced by the companies they invest in and can manage any associated volatility themselves by appropriately diversifying their investment portfolio. Furthermore, in the long term, currency fluctuations tend to be offset by price changes, thereby reducing currency risk in real terms.