What do you understand by Currency Risk? Discuss the important products that are generally used by banks in managing currency risk.

Currency risk, also known as exchange rate risk or foreign exchange (forex) risk, refers to the potential financial loss that arises from fluctuations in the exchange rates between different currencies. In the context of strategic management, particularly in multinational corporations and financial institutions, currency risk is a critical consideration because it can directly impact profitability, cash flow, and the overall financial stability of a business that operates across borders. This type of risk becomes more significant when a company deals in multiple currencies for purposes such as importing raw materials, exporting goods, repatriating profits, or servicing foreign-denominated debt.

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