Translation risk

Translation risk is the risk of incurring losses when there are adverse changes in exchange rates. Translation risk can arise when a business must pay a supplier in another currency, receive payment from a customer that is denominated in a different currency, or from holding assets that are denominated in a foreign currency. Translation risk can be a major concern for organizations with extensive international operations. A firm that wants to mitigate its translation risk can engage in hedging transactions.

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Enterprise Risk Management