Risk management in foreign currency operations of business entities

Abstract

Risk is an integral part of everyday business. Doing business outside the borders of the national economy implies settlements and payments in different currencies and carries with it the occurrence of risks of changes in exchange rates, interest rates on the international market and the like. Globalization has led to the fact that economic entities are necessarily directed to do business with foreign economic entities, either in the role of buyer or in the role of seller. In both cases, payment is implied, but also settlement in domestic and foreign currency, since in the Republic of Serbia the official currency is the dinar, and most foreign exchange operations are performed in euros and dollars. The problem can arise on several grounds, due to the mismatch between the realization of business and payments, due to the overestimation or underestimation of the domestic currency in relation to the foreign currency, but also due to numerous other reasons. Having in mind the above, the aim of this paper is to point out the need for risk management in foreign exchange operations of economic entities, which significantly affects the stability of the financial and overall economic system of a particular national economy.