It is possible for companies to minimize exchange rate risk through:

Question

Quizplus · Accepted Answer

Companies can minimize exchange rate risk by having a global sourcing network, allowing them to source materials from multiple countries and thus reducing their exposure to currency fluctuations in any one country. Additionally, diversifying production locations across multiple countries can also help to mitigate exchange rate risk by spreading their production costs across different currencies. Therefore, both options a and b are beneficial strategies for minimizing exchange rate risk. Single sourcing, on the other hand, would increase exchange rate risk as the company would be heavily reliant on one country's currency. Tariffs do not directly mitigate exchange rate risk, they are imposed by governments to protect domestic industries and can often exacerbate exchange rate fluctuations.

It Is Possible for Companies to Minimize Exchange Rate Risk