Analyzing Currency Risk Factors for XYZ Corporation

XYZ Corporation, a multinational company, operates in various countries earning revenue in multiple currencies. Due to fluctuations in currency exchange rates, XYZ faces significant foreign exchange risk, especially with its major revenue accounts denominated in the Euro and British Pound. As the Chief Financial Officer, you have been asked to assess the major currency risk factors impacting XYZ Corporation’s financial performance and recommend strategies to manage these risks effectively.

In your essay, analyze at least three key currency risk factors that can affect XYZ Corporation, specifically focusing on economic fundamentals, political and regulatory environments, and exchange rate volatility. Furthermore, discuss potential hedging strategies, including forward contracts and options, and how they can mitigate these identified risks.