Question

Is management of translation exposure more
important that economic exposure? Discuss.

Answer 1

In addition, foreign trade and loans may involve foreign-exchange risk. An important task of the international financial manager is to compare potential losses with the cost of avoiding these losses. Three basic types of exchange exposure are translation exposure, transaction exposure, and economic exposure.

Answer 2

Economic exposure is affected by the ‘volatile nature’ of the currency. It increases when the foreign exchange volatility increases and it decreases when the volatility comes down.  

Explanation:

• Translation exposure is more like a risk that the fluctuations will affect the company assets, ‘liabilities’ or income.

• Economic Exposure management is the technique that the organizations can make use of for handling the economic risk.  

• Economic exposure is more for the multinational companies who are operating in the international markets because of the transaction involving foreign currencies.  

• Translation exposure is more of a risk that takes place when the company has put its assets, liabilities or income in the use of foreign currency.

Learn more about economic exposure

Explain how a firm can manage its economic exposure

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How would you differentiate transactions exposure and economic exposure?

https://brainly.in/question/9950048