Pre-transaction risk

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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