Chapter 12 Operating Exposure

Operating Exposure Operating exposure, also called economic exposure, competitive exposure, and even strategic exposure on occasion, measures any change in the present value of a firm resulting from changes in future operating cash flows caused by an unexpected change in exchange rates. Copyright © 2007 Pearson Addison-Wesley. All rights reserved.

Attributes of Operating Exposure Measuring the operating exposure of a firm requires forecasting and analyzing all the firm’s future individual transaction exposures together with the future exposures of all the firm’s competitors and potential competitors worldwide. From a broader perspective, operating exposure is not just the sensitivity of a firm’s future cash flows to unexpected changes in foreign exchange rates, but also to its sensitivity to other key macroeconomic variables. This factor has been labeled macroeconomic uncertainty. Copyright © 2007 Pearson Addison-Wesley. All rights reserved.