Corporation C is a mutual fund company. For the past few months, the management was alarmed by the deterioration of the Philippine Capital Markets. In order to avoid greater losses, the management decided to hedge their funds in Fiji, a very stable economy yet the exchange rate of their currency vis a vis the Philippine peso is quite extreme wherein peso is quite dominant than Fiji’s currency. Decide which of the choices is correct.  A. This is the best model of international diversification B. This is to be considered a risk-spreading C. The company opens its gate to greater risk D.All of the above choices are correct

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.