What Challenges Do Businesses Face in Managing Foreign Exchange Risk?
1. Predicting Market Movements: Exchange rates are influenced by numerous factors such as economic data, geopolitical events, and market sentiment, making it challenging to predict their movements accurately.
2. Cost of Hedging: Using financial instruments for hedging can be expensive, and not all businesses can afford these costs, especially small and medium enterprises.
3. Operational Complexity: Implementing effective risk management strategies requires a deep understanding of financial markets, regulatory environments, and sophisticated financial tools, which may be beyond the capabilities of some businesses.