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How to manage a short-term currency fluctuation risk such as Brexit Logo cgma

  Mark D. Mishler, CPA, and Samantha White |   Free |   AICPA and CIMA |   24 Jun 2016 |   CGMA Magazine

This article discusses factors related to managing short-term currency fluctuation risk.

Topics covered:
  • Management accounting: Business: Strategy, Foundational
  • Management accounting: Technical: Risk management & internal control: Risk management policies & procedures, Foundational

6 Comments/Reflections


M W Feb 2020

Companies have two types of risk with short term currency fluctuation:
Translation and Transactional. Translation risk will taken care of when the asset and the liability is in the same currency and the profit/loss on the currency will be set off against each other. Transactional risk must be minimised by making use of Hedging of any sales or purchases especially in times where uncertainy is very high and fluctuation are due to happen.
Vishal Patnaik

Vishal Patnaik Sep 2018

The topic has made me aware about hedging and the two types of foreign currency risks - transaction risk and translation risk. It has also guided me to go through the right standard IAS21 to review this further.A nice to know article.
Tendai Nyakurimwa

Tendai Nyakurimwa Aug 2017

The article is quite informative and gives practical steps that help in preparing for risk associated with  rates movements. I enjoyed reading it and will help me going forward in scanning the environment. 
The article made sense to me because i have been involved in calculating translation reserves.
I hope to impart the knowledge to my colleagues as well
Jamie Wesencraft

Jamie Wesencraft Aug 2016

I very topical article, with the illustrated example being particularly useful.

I found it unusual that my own organisation does not hedge foreign currency and we have been left exposed post-Brexit as we report in USD but have significant income generation here in the UK.

I will look more into some reading on currency hedging - it is a topic i find interesting and could be of value in my current role, future positions, and is relevant given the increasing uncertainty in the global economic environment.
Lalit Bhandary

Lalit Bhandary Aug 2016

CIMA covers this topic very well in its program. Its nice to read such topic cause concept out at sight is out of mind. This article helps to refresh our knowledge.