What is exchange rate risk?

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What is exchange rate risk?

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What is exchange rate risk?

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Exchange rate risk refers to fluctuation in exchange rates between currencies over a period of time. When a multinational corporation operates in more than one country, it is subject to certain risks. When there is a change in the currency exchange rate, theĀ  foreign cash flows of the company get affected. The value of foreign cash flows may get appreciated or even devalued. This risk arising due to change in foreign exchange rate, is called "Exchange rate risk".

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