DEFINITION
Economic Exposure

"Economic exposure": Foreign exchange risk management. The extent to which the value of a firm is at risk of adverse change as a direct or indirect consequence of future movements in foreign exchange rates. This risk includes: (1) The risk of adverse effects on the firm’s future operating cash flows arising from changes in foreign exchange rates. For example, key competitors having currency cost bases in weaker or depreciating currencies. (2) The longer-term version of transaction exposure – for transactions expected to be agreed in the future, but not yet contractually committed. This is sometimes called Pre-transaction risk or Pre-transactional exposure.
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