Chp 8: Currency Risk - Exchange Rates

Question 1

What are five internal controls for exchange rate risk?

Answer 1

1. Invoicing in the company’s home currency - transfers risk to the customer/supplier but may reduce demand
2. Matching receipts and payments - facilitated by an overseas bank
3. Matching assets and liabilities - financing an overseas investment with an overseas loan
4. Leading / Lagging - to take advantage of favourbale rates, inherently risky
5. Netting off intercompany balances