How Do International Businesses Seek To Minimize Foreign Exchange Risks?
There are various strategies which are adopted by the companies in International business to avoid foreign exchange risks. The first strategy is to pursue local currency loans first, and these loans have low complexity and low to moderate cost. Companies also go for hedging to avoid foreign currency risks. Hedging is the practice in which you make two investments in two different currencies. So that, if the value of one currency goes down then other may go up and you may face no risk. This strategy has high complexity and moderate to high cost. Companies also make policies with the foreign companies to manage their foreign exchange risk however, it cannot be achieved very easily. There are various other alternatives but these are some of the most commonly used techniques for lowering foreign exchange risk.
