Exchange rate risk management of foreign trade enterprises

Abstract

Global economic integration is expanding worldwide, and each country's potential and extent of exchange rate volatility will become more significant with changing national policies. As a result of engaging in import and export business, foreign trade enterprises have a large volume of foreign currency transactions and holdings. Foreign trade enterprises in every country need to raise their awareness of exchange rate risk management. Import and export enterprises must avoid exchange rate risks in various ways to ensure minimum losses and maximum profits. This article examines how foreign trade enterprises can manage exchange rate risk in a way that enables them to avoid exchange rate risk and thus ensure stable business returns. Following a logical relationship and structure, it uses the literature research method to introduce how companies need to respond to changes in exchange rates internally. It also introduces how companies can control exchange rate risk through financial instruments.