Floating exchange rates - how do they affect corporate strategy and financial performance?

Question

Buying and selling in multiple countries and regions introduces exchange rate risk. Floating exchange rates - how do they affect corporate strategy and financial performance?

Answer 1

This comes under organizational strategy not corporate strategy. There are risk involved for companies operating in floating currency or flexible exchange rate regimes. They have to options of either assimilating the risk, transfering risk or sharing risk or nullifying risk. They use different strategies for the same. For assimilating risk they charge it as expense, for transfering risk they expect the buyer to assimilate the risk through some contractual obligations by them, sharing risk they divided the risk between the buyer and seller and for nullifying risk they hedge in the forward market for currency fluctuations.