What is the objective of managing operating exposure?

Question

Quizplus · Accepted Answer

The objective of managing operating exposure is to stabilize cash flows in the face of fluctuating exchange rates. By managing operating exposure, a company can reduce the impact of currency fluctuations on its cash flows, which helps to minimize the risk of financial loss. This can be achieved through a range of strategies, such as hedging, diversification, and pricing adjustments. Selecting low cost production sites is a strategy for managing cost exposure, which is another form of foreign exchange risk but not related to the objective of managing operating exposure. Increasing the variability of cash flows in the face of fluctuating exchange rates is not a desirable outcome and is therefore not a relevant objective of managing operating exposure.

What Is the Objective of Managing Operating Exposure