May 19th, 2016
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Currency RiskA major concern with international purchasing is managing the risk associated with internationalcurrency fluctuations. Because of this risk, companies often take steps to reduce the uncertainityassociated with fluctuating currencies.Companies use a variety of measures to address the risk associated with currency fluctuations.These range from very basic measures to the sophisticated management of internationalcurrencies involving the corporate finance department.a) Sharing currency fluctuation riskEqual sharing of risk permits a selling firm to price its product without having to factor in theacceptance of risk costs. Sharing of risk requires equal division of a change in an agreed-uponprice due to currency fluctuation.b) Currency adjustment contract clauseWith currency adjustment clauses, both parties agree that payment occurs as long as exchangerates do not flu

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