What is the scope of economic exposure?

Date:2023-03-07
Economic exposure, also known as operating exposure, refers to the risk that a company’s profitability will be adversely affected by changes in exchange rates, inflation, and other macroeconomic variables. It is important for companies to assess and manage their economic exposure to these macroeconomic risks because they can have a wide-reaching impact on a company’s bottom line. The scope of economic exposure includes, but is not limited to, such risks as the effect of devaluation or revaluation of currencies, changes in import and export regulations, changes in the cost of labor, and changes in the cost of raw materials. Companies must also consider how economic instability, such as fluctuating exchange rates and inflation, can affect the demand for their products and services.
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