Slide MGT411 Slide09

Chapter 12
Operating Exposure

Copyright © 2007 Pearson Addison-Wesley. All rights reserved.

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.

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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.

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