Sample interview questions: How do you assess and manage foreign exchange risks?
Sample answer:
Assessing Foreign Exchange Risks
- Identify Currency Pairs: Determine the currency pairs that pose the greatest risk to the business based on international operations and exposure.
- Forecast Exchange Rate Movements: Monitor economic indicators, geopolitical events, and central bank policies to anticipate potential fluctuations in currency values.
- Assess Impact: Quantify the potential impact of exchange rate changes on revenue, expenses, and profitability to establish risk tolerance levels.
Managing Foreign Exchange Risks
- Diversify Revenue Sources: Generate revenue from various geographic regions to reduce reliance on a single currency and mitigate exchange rate exposure.
- Match Currency Flows: Align expenses and revenue denominated in the same currency to minimize the impact of currency fluctuations.
- Use Forward Contracts: Lock in future exchange rates at a predetermined level to mitigate risks associated with anticipated currency movements.
- Utilize Options: Read full answer
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