Currency Risk Factors in Multinational Context

As a portfolio manager of a multinational corporation, you are responsible for managing the currency exposure of the company’s international investments. The company operates in several countries and conducts transactions in various currencies.

As part of your annual review, you need to assess the currency risk factors that impact the firm’s foreign cash flows. Discuss the various currency risk factors that impact multinational corporations like yours, focusing on both economic and political risks. Provide specific examples of how these risks might manifest in your company’s operations and financial results. Additionally, discuss potential strategies to manage these risks effectively.