Foreign exchange risk management
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 price lists in the currencies of its customers' local markets.
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.
The same as Contingent risk as applied to currency management.
Also known as pre-transactional risk, pre-transaction exposure or pre-transactional exposure.