Foreign exchange risk management first determines which items and amounts, and the risks faced by manufacturers are related to exchange rate changes. Changes in assets, liabilities, profits or expected future cash flows, whether good or bad, the value of parents or their own money. Foreign exchange used in environmental exposure refers to the assets, liabilities, profits or expected future cash flows owned by an enterprise, and the local currency value of such assets, liabilities, profits and losses or expected future cash flows. The risk of exchange rate fluctuation is because the value of domestic currency may change.

In this sense, assets, liabilities and expected future cash flows are obviously exposed to foreign exchange risks. However, some expected future cash flows are calculated in local currency, which may also be exposed. For example, a British company selling in its domestic market will almost certainly affect or weaken the present value of its expected cash flow to a competitive British company by strengthening its competitors in Germany.

Foreign exchange risk is usually based on whether it is classified into one or more categories.

(1) transaction risk;

(2) translation exposure;

(3) Economic risks.

The occurrence of transaction risk is due to the merger of assets and liabilities denominated in foreign currency or paid in foreign currency. Translation in the process of compiling comprehensive accounts. This concept is basically concerned, and then it can be called accounting exposure. Economical, because the present value of expected cash flow from future operations flows into domestic currency or foreign currency, it can be priced by changing the exchange rate. Trading and economic risks are cash flow risks. Transaction risk is a relatively simple concept, but translation and economic risk are more complicated.