Currency Risk Factors Affecting ABC Corporation

ABC Corporation is a multinational firm based in the United States that conducts a significant amount of business in Europe and Asia. Recently, it has seen increased volatility in the foreign exchange markets, which has raised concerns about currency risk exposure. ABC Corporation's management is particularly concerned about transaction risk, translation risk, and economic risk.

The company imports raw materials from Europe, pays in euros, and sells its products in Asia, receiving payments primarily in Japanese yen. The CFO has asked you to evaluate the currency risk factors that affect ABC Corporation, explain how these risks can materialize, and suggest risk management strategies that the firm could implement to mitigate these risks.

Your response should discuss at least three specific currency risk factors, how they can affect the financial performance of ABC Corporation, and evaluate suitable hedging techniques, including the use of financial derivatives.