This risk that exchange rate movements will adversely impact reported financial results on a firm's financial statements

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Translation exposure refers to the risk that an exchange rate movement will affect the value of a firm's financial statements that are translated into a different local currency. This is often a concern for multinational companies with foreign subsidiaries. Transactions exposure, on the other hand, relates to the risk of exchange rate movements affecting the value of specific transactions that take place in foreign currencies. Economic exposure refers to the risk that exchange rate movements will affect future cash flows and profits of a firm, while political risk refers to the impact of political events or decisions on a firm's operations and financial performance.

This Risk That Exchange Rate Movements Will Adversely Impact Reported