INSOL International

Foreign exchange risk management

1.

Pre-transaction foreign exchange risk arises from needing to commit to a price before actually entering into transactions or commercial agreements.

For example, an exporter may need to publish a price list in the currency of its customers' local market.

Pre-transactional currency exposure also exists when an organisation tenders for a contract priced in a foreign currency, or where there are associated foreign currency costs, for example for materials, labour or other operational inputs.

Some practitioners do not identify pre-transaction risk as a separate class of risk, rather considering it to be a shorter-term type of economic exposure.

2.

The same as Contingent risk as applied to currency management.

Also known as pre-transactional risk, pre-transaction exposure or pre-transactional exposure.

See also

• Contingent risk
• Currency risk
• Economic exposure
• Transaction exposure