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Question 301 - CSCP discussion

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Using financial tools to minimize the impact of currency fluctuations is an example of what type of risk management strategy?

A.
Mitigation
Answers
A.
Mitigation
B.
Recovery
Answers
B.
Recovery
C.
Prevention
Answers
C.
Prevention
D.
Diversification
Answers
D.
Diversification
Suggested answer: A

Explanation:

Using financial tools to minimize the impact of currency fluctuations falls under the category of risk mitigation. Mitigation strategies are designed to reduce the potential negative impact of risks. Financial instruments such as hedging, forward contracts, and options can be used to lock in exchange rates or offset potential losses from currency fluctuations. These tools help stabilize costs and revenues in international trade, protecting the company from adverse currency movements. Options B (Recovery), C (Prevention), and D (Diversification) pertain to different aspects of risk management but do not specifically address the financial strategy for handling currency risks.

Hill, C. W. L. (2013). International Business: Competing in the Global Marketplace.

https://www.investopedia.com

asked 16/09/2024
Dilip Kumar
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