When companies are paid in foreign currencies by overseas customers, they face the possibility of less-than-expected profits if currency values change.

Although hedges for this risk are now well established, organisations may prefer a more direct risk reduction strategy, perhaps shifting business activity away from those countries of greatest volatility.

Critical questions you need to consider

• If you enter new countries, have you factored in foreign exchange (FX) exposure?

• Are you aware of political risks in the countries you operate in?

• Have you modelled the impact on earnings of FX volatility?

• Have you factored FX exposures to your Risk Adjusted Return on Capital on a project-by-project basis?

• Have you considered dual-trigger instruments that can package both insurance and foreign exchange risks?