Analysis of Currency Risk Factors for XYZ Corporation

XYZ Corporation is a multinational company headquartered in the United States with significant operations in Europe and Asia. Over the past three years, the company has experienced substantial foreign currency exposure due to fluctuations in exchange rates, particularly with the Euro (EUR) and the Japanese Yen (JPY). Recent analysis indicates that the volatility in the Euro has risen by 25%, driven by geopolitical tensions and changing monetary policy in the European Union. Conversely, the JPY has shown signs of depreciation against the USD, affected by Japan's ongoing quantitative easing measures.

As a manager tasked with overseeing XYZ Corporation's foreign currency exposure, you are required to analyze the key currency risk factors affecting the company's financial performance.

In your essay, discuss the primary currency risk factors that XYZ Corporation should consider, elaborate on how these factors can impact the company's cash flows and financial statements, and propose risk management strategies to mitigate these currency risks. Support your answer with specific examples and analytical reasoning.