Currency risk or exchange rate risk, also known as foreign currency risk, is the possibility that currency fluctuations can affect a firm’s expected future operating cash flows, i.e., its future revenues and costs. Currency risk affects all companies with international operations. For companies desiring to take advantage of the growth opportunities from buying and selling in multiple currencies, effectively managing currency risk is an essential task. Currency risk can be decomposed into: Pricing risk, between the moment a transaction is priced and settled Transaction risk, between the moment a transaction is agreed and settled Accounting risk, between the moment the invoice is created and settled The most effective tool to manage currency risk is to deploy FX hedging programs —and combinations of hedging programs — that allow management to achieve the firm’s goals in a systematic way, meaning: (a) targets must be consistently accomplished over time; (b) the goals of the program must be clearly communicated across the enterprise in as much detail as possible.