currency risks, or otherwise risk of exchange rate losses directly associated with globalization of banking operations, the formation of joint banking institutions and companies, as well as the diversification of their activities, representing a probable financial loss that may be associated with currency fluctuations.Their are a few species.
Currency risks are structured in a certain way: commercial, translational, conversion, as well as risks forfeiting.Commercial usually associated with the inability or unwillingness of the debtor to pay for the obligations taken on.Under the conversion is made to understand the risks of losses for some specific operations.They can be divided into the translation risk, the economic risk of transactions.
first is often linked to differences in the accounting of assets and liabilities in foreign currency.If there is a fall in the exchange rate, which is expressed in the asset, its value also falls.If the reduced value of assets, the share capital of the bank or company is also reduced.If we consider the issue from an economic position, the risk of the transaction is more important, it examines the impact of changes in exchange rates for the coming stream of payments, and hence the planned profitability of the bank or firm.
economic risks for the company lies in the fact that the value of its assets and liabilities may change in the direction of reduction or enlargement, this is due to currency fluctuations.
risk transactions coupled with the uncertainty of the future value of the foreign currency transactions in the national currency.The profitability of the company and the change entails a change in its creditworthiness, and therefore the bank is very important to be aware of any foreign exchange transactions carried out by the client.In a situation of instability of exchange rates one of the methods of protection against currency risk can be considered as the choice of the currency of the contract, the most acceptable to counterparties.Exporters and lenders preferred to use relatively more sustainable option.Choose currency may have an impact on the effectiveness of lending and trading operations.
Currency risks and methods of their regulation
It is said that this type of risk is an essential part of the company, which are subject to the participants of economic relations.Under the foreign exchange risk in this case can be understood as a risk of losses associated with changes in foreign currency during the period between the conclusion of the contract and the payment.The basis of the inherent changes in the real price of a monetary obligation at a particular time.This is subject to both parties of the transaction.
Due to the fact that the courses are absolutely all currencies are subject to periodic fluctuations, the practice of international monetary relations was chosen approach to the selection of strategies to protect against these risks.He is subject to a number of important points.
To start the decision on the need to take special measures for risk insurance, and then allocated the share of the foreign exchange contract or credit, it has an open foreign currency position, which in the future will insure.The last method is chosen and the method of insurance.International practice provides a few basic ways of risk insurance: mutual agreement between the parties to the transaction, one-sided arrangement or operation of insurance companies, as well as government and bank guarantees.Currency risks are insured by one of these methods, depending on several factors.World practice of insurance fully reflects the changes in the monetary system and the world economy as a whole.
