If you do business abroad, you are exposed to currency risk. Currency risk represents a potential loss due to a change in the exchange rate, which everyone who does business abroad is exposed to. A change in the exchange rate affects the cash flow of already concluded deals as well as the cash flow that will result from future deals.
Interest rate volatility has a major impact on the cost of financing your business. Due to the need for a long-term financial planning policy, many companies decide to hedge their interest rate exposure, as they are aware of the speed and strength of change in interest rate trends.