(1) Exchange rate risk: also known as foreign exchange risk, refers to the possibility that economic entities will suffer losses due to exchange rate changes in their economic activities of holding or using foreign exchange. (2) Types of foreign exchange risks: transaction risk, translation risk and economic risk. 1. Transaction exchange rate risk refers to the possibility that economic entities will suffer losses due to changes in foreign exchange rates in transactions denominated and received in foreign currencies. Transaction risks mainly occur in the following situations: (1) risks in the import and export of goods and services. (2) Risk of capital input and output. (3) Risks of foreign exchange positions held by foreign exchange banks. 2. Conversion exchange rate risk, also known as accounting risk, refers to the possibility of book losses caused by exchange rate changes when economic entities convert the bookkeeping base currency into bookkeeping base currency in the accounting treatment of balance sheets. The bookkeeping base currency refers to various currencies used in circulation in economic entities and commercial activities. Bookkeeping functional currency refers to the reporting currency used in the preparation of consolidated financial statements, usually the local currency. 3. Economic exchange rate risk, also known as operational risk, refers to a potential loss caused by the unexpected change of exchange rate affecting the production and sales quantity, price and cost of an enterprise, which leads to the decrease of income or cash flow of an enterprise in a certain period in the future. [Edit this paragraph] Exchange rate risk and its main manifestations The Bretton Woods fixed exchange rate system collapsed in 1973, especially after the Jamaica Agreement officially recognized the legitimacy of the floating exchange rate system in 1976, the fixed exchange rate system controlled within a certain fluctuation range disintegrated. At present, the floating exchange rate system is widely implemented in all countries in the world, and the exchange rates among major currencies such as the US dollar, the Japanese yen, the mark and the British pound fluctuate violently. It is difficult to grasp the final accounts of international creditor's rights and debts in advance due to exchange rate changes, resulting in exchange rate risks. China is also in an international monetary system with a floating exchange rate system, and exchange rate risk still seriously affects China's balance of payments and economic benefits of enterprises, especially in today's reform and opening up and the rapid development of foreign investment in China. Due to the existence of international division of labor, trade and financial exchanges between countries have become inevitable and become an important driving force for domestic economic development. The fluctuation of foreign exchange rate will bring great risks to international traders and investors. This kind of risk is called exchange rate risk, which is manifested in two aspects: trade exchange rate risk and financial exchange rate risk. In international trade activities, the prices of goods and services are generally denominated in foreign exchange or international currency. At present, about 70% of countries are denominated in dollars. However, under today's floating exchange rate system, it is difficult for producers and operators to estimate costs and profits when conducting international trade activities due to frequent fluctuations in exchange rates. The resulting risks are called trade risks. In the international financial market, all loans are foreign exchange. If the foreign exchange interest rate of the loan rises, the borrower will suffer huge losses. The drastic change of exchange rate can even devour large enterprises. The fluctuation of exchange rate also directly affects the increase or decrease of the value of a country's foreign exchange reserves, which brings great risks and national difficulties to the management of central banks. This kind of exchange rate risk is called financial exchange rate risk.