ACCA AFM Syllabus E. Treasury And Advanced Risk Management Techniques - Protection against transaction risks - Notes 2 / 5
Factors to consider before deciding to protect transaction exposure
The factors may include the following:
Future exchange rate movement.
The future movements in exchange rate may depend on a number of factors including interest rate, inflation, central bank actions and economic growth.
The cost involved in the hedging, eg commission.
The ability of the company to absorb foreign exchange losses.
Expertise within the company.
The company’s attitude towards foreign currency transactions and the importance of overseas trading.