Risks of Currency Exchange in International Business
Changing Currency Values: The value of money can change a lot.
For instance, in 2020, the value of the Euro compared to the US Dollar changed by more than 8%.
This can make it hard for companies to stick to their international contracts.
Money Conversion Losses: Companies that work in other countries might lose money when they change foreign earnings back to their own currency.
A good example is the Turkish Lira, which lost 30% of its value against the US Dollar in 2021.
That’s a big risk!
Currency Exchange Fees: When companies swap one currency for another, they often have to pay extra fees.
These fees can be over 2% for each transaction, which eats into their profits.
Unstable Economies: In countries with very high inflation, like Venezuela, the value of their money can drop quickly.
This makes it riskier for investors.
They might lose a lot because the money isn’t worth as much as before.
Risks of Currency Exchange in International Business
Changing Currency Values: The value of money can change a lot.
For instance, in 2020, the value of the Euro compared to the US Dollar changed by more than 8%.
This can make it hard for companies to stick to their international contracts.
Money Conversion Losses: Companies that work in other countries might lose money when they change foreign earnings back to their own currency.
A good example is the Turkish Lira, which lost 30% of its value against the US Dollar in 2021.
That’s a big risk!
Currency Exchange Fees: When companies swap one currency for another, they often have to pay extra fees.
These fees can be over 2% for each transaction, which eats into their profits.
Unstable Economies: In countries with very high inflation, like Venezuela, the value of their money can drop quickly.
This makes it riskier for investors.
They might lose a lot because the money isn’t worth as much as before.