Currency Risk
Uncertainty from exchange rate fluctuations.
Formula
Currency Risk Exposure = Revenue in Foreign Currency × Exchange Rate Volatility
Real World
Jaguar Land Rover reported a £1 billion loss warning in 2018 partly due to sterling uncertainty, as it sells heavily in dollar and euro markets while manufacturing costs are largely in pounds.
Exam Focus
Distinguish between transaction risk (individual deals) and translation risk (consolidated accounts) — mixing these is a common exam error.
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