Glossary

The tail risk is the probability and potential impact of extreme, low-probability currency movements that fall outside normal market expectations and could cause disproportionately large losses. Tail risk events are characteristically unpredictable and can overwhelm standard hedging strategies, requiring specific consideration in risk management frameworks and potentially specialised hedging approaches or contingency planning.

Lack of automation may lead finance teams to neglect some currency pairs that can be a major source of FX risk.