The Exchange Rate

The Initial Problem When a firm sells to foreign customers, either the firm or its buyers are subject to the exchange rate risk inherent in such transactions. The sales/marketing side of the firm is primarily concerned with facilitating these transactions by doing everything in its power to make the buyer happy with its overall offering, while the treasury/finance side of the firm is primarily concerned with minimizing the financial risk inherent in such …

…firms would be to utilize various forms of countertrade (modern variants of barter) in conducting their global transactions. The basic idea under this approach would be that payments for products sold would be received in the form of other products rather than in the form of foreign currencies. Since the value of a product might be far less volatile than the value of currencies, the risk of fluctuations in product value should be greatly reduced.