Foreign Currency Forward Contracts and Cash Flow Hedging

Managing the Foreign Exchange Risk

Josef Rashty, CPA, and John O'Shaughnessy, PhD, CPA (inactive)

The global economy and financial markets have been evolving rapidly over the past few decades, and the pressures on companies to do business internationally have risen significantly. Businesses operating internationally have experienced severe currency volatility in recent years. currency volatility not only impacts a company's financial statements; it also affects decisions on mergers and acquisitions, current and future procurement plans, investments, and divestitures. Foreign exchange (FX) fluctuations and unmanaged FX risks affect a business's cash flows, income and loss, assets, liabilities, credit, and even market capitalization.