The following are mechanisms that a company can

are conscious of their risk and have policies at hand to efficiently manage it.
The following are mechanisms that a company can protect itself against losses incurred due to a
sudden rise in the foreign exchange rate:
Hedging: This is by having a company’s operations in several different countries and
their assets and liabilities designed in foreign currency. The foreign exchange value of its assets
and liabilities a company operates in the foreign exchange market as hedgers to protect itself
against the risk of fluctuations in the foreign exchange rate (MyForexEye, 2018). In our case, the
Striking Furs could be having a branch in Canada. By hedging foreign assets in the company’s
portfolio, it will not lose any money if the currency in investment falls. On the other hand, the
company will not gain anything if that currency appreciates it. With numerous currency

FOREIGN EXCHANGE RISK MANAGEMENT 3
fluctuating, investors need to remove as much as their currency risks as they can.
Currency Forward Contract: This is a popular currency risk management mechanism,
it enables organizations to secure a fixed exchange rate or payment scheduled in the future to
protect themselves against currency market volatility. The payment method can be a flexible or
fixed date. The ability to secure the rate helps prevent the foreign exchange risk, protect the
business’s margin, and allows management to predict the cash flow more precisely (Homaifar,
2004). With a forward contract, management can better forecast their profit margins and