Foreign Exchange Management Procedure | TM1040

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easily editable in ms wordForeign Exchange Management Procedure

The Foreign Exchange Management Procedure ensures thoughtful and intelligent decisions are made about foreign currency exchange. The procedure minimizes the associated risk of less than expected returns or higher than expected costs due to fluctuations in exchange rates. The Foreign Exchange Management Procedure applies to the Finance and Accounting departments. (10 pages, 1252 words)

The CFO should analyze risk or exposure from accepting or disbursing foreign currency annually or as needed, due to conditions and opportunities. Converting or translating currency (to/from US dollars, euros, yen, etc.) can diminish sales income or lead to higher-than-expected costs because of rate fluctuation – this is referred to as currency risk or foreign exchange risk.

Foreign Exchange Management Responsibilities:

The CFO (Chief Financial Officer) is responsible for assessing risks and exposure due to business conducted in foreign currency. The CFO should prepare a report and recommendations for dealing with foreign currencies and should follow and execute the established foreign exchange management plan.

Top Management and the Board of Directors should review and access foreign exchange risks and policy options, and then set the company foreign exchange management policy.

Foreign Exchange Management Definitions:

Foreign exchange risk – Risk that currency movements alone may affect the value of an investment; also called “currency risk”.

FX – Common abbreviation for “foreign currency exchange”.

Hedge – Insure against lost revenue due to foreign currency fluctuations.

Translation – Actual act or method of converting one form of currency to another.

Foreign Exchange Management ProcedureForeign Exchange Management Procedure Activities

  • Foreign Exchange Management Plan
  • Foreign Exchange Management
  • Reviewing Foreign Exchange Management
  • Improving Foreign Exchange Management

Foreign Exchange Management Procedure Forms



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