1、Transaction exchange rate risk

The use of foreign currency for denominated transactions, economic agents due to changes in foreign exchange rates and the possibility of losses. Transaction risk mainly occurs in the following occasions.

(1) Risk in the import and export of goods and services transactions.

(2) The risk of capital import and export.

(3) The risk of foreign exchange positions held by foreign exchange banks.

2、Economic risk

Also known as operational risk, it refers to a potential loss caused by unexpected exchange rate changes that affect the production and sales volume, price and cost of an enterprise, resulting in a decrease in revenue or cash flow in a certain period in the future.

3、Translation risk

Also known as accounting risk, it refers to the possibility of book loss due to exchange rate changes in the accounting treatment of the balance sheet by the economic entity when converting the functional currency into the bookkeeping currency. Functional currency refers to the various currencies used in the flow of economic entities and business activities. The book-entry currency refers to the reporting currency used in the preparation of the consolidated financial statements, which is usually the national currency.

4、Country risk

Country risk refers to the possibility of loss caused by the sovereign acts of a country in international economic activities. Within the scope of sovereign risk, the state, as a party to the transaction, constitutes a risk directly through its default and indirectly through changes in policies and regulations, both of which are country risk.

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