Scenario - The Gayla Corporation
The Gayla Corporation is a multinational business that conducts operations in twelve foreign markets. This multi-million dollar organization is very familiar with currency exchanges and has considerable understanding when it comes to the risks associated with operating in the global market arena. The Gayla Corporation claims it would not be as successful without the expertise of the financial wizards that work for it. The company has not lost money so far and plans to stay that way.
-The Gayla Corporation must fully understand and effectively handle the short-term changes in exchange rates and how this can affect operating costs and revenues derived from its international business operations. Which of the following best identifies what this organization is facing in this situation?

Question

Quizplus · Accepted Answer

The Gayla Corporation is facing transactions risk, which is the risk of financial losses due to changes in exchange rates in the short term when conducting transactions in foreign currencies. The company must effectively manage this risk to ensure that it does not suffer any financial setbacks. The other choices, such as exchange risk beta, beta risk, hedging, and translation risk, are related to different types of risks that companies can face in the global market, but they are not relevant to the situation described in this scenario.

Scenario - the Gayla Corporation