Risk faced by companies or individuals due to fluctuations in exchange rates FOREIGN EXCHANGE EXPOSURE FFFF It arises when a business or individual has financial transactions denominated in a currency other than their domestic currency Under Transaction exposure management Forward contacts Currency options Currency swaps Netting Forex exposure refers to the potential impact of changes in exchange rates on a company s financial performance and cash flows It arises from conducting international transactions involving multiple currencies and can affect a company s profitability competitiveness and financial stability Under Translation exposure management Natural hedging Forward contacts Net investment hedging Under operating exposure management Diversification Pricing strategy Operational hedging Financial hedging Cross currency financing