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Operating exposure measures changes in a firm's present value resulting from unexpected exchange rate changes impacting future operating cash flows. It requires forecasting a firm's individual transaction exposures alongside competitors' exposures globally and considers sensitivity to exchange rate changes as well as other macroeconomic variables that create uncertainty.

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52 views3 pages

Slide MGT411 Slide09

Operating exposure measures changes in a firm's present value resulting from unexpected exchange rate changes impacting future operating cash flows. It requires forecasting a firm's individual transaction exposures alongside competitors' exposures globally and considers sensitivity to exchange rate changes as well as other macroeconomic variables that create uncertainty.

Uploaded by

Coleth Gutierrez
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© © All Rights Reserved
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Chapter 12

Operating Exposure

Copyright © 2007 Pearson Addison-Wesley. All rights reserved.


Operating Exposure

• Operating exposure, also called


economic exposure, competitive
exposure, and even strategic exposure on
occasion, measures any change in the
present value of a firm resulting from
changes in future operating cash flows
caused by an unexpected change in
exchange rates.

Copyright © 2007 Pearson Addison-Wesley. All rights reserved. 1-2


Attributes of Operating Exposure

• Measuring the operating exposure of a firm requires


forecasting and analyzing all the firm’s future individual
transaction exposures together with the future exposures of
all the firm’s competitors and potential competitors
worldwide.
• From a broader perspective, operating exposure is not just
the sensitivity of a firm’s future cash flows to unexpected
changes in foreign exchange rates, but also to its
sensitivity to other key macroeconomic variables.
• This factor has been labeled macroeconomic uncertainty.

Copyright © 2007 Pearson Addison-Wesley. All rights reserved. 1-3

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