Analysis of Foreign Exchange Risk Assessment Work for Credit of all Corporate Entities

Dragaš, Radovan and Marjanović, Darko (2013) Analysis of Foreign Exchange Risk Assessment Work for Credit of all Corporate Entities. In: III International Symposium Engineering Management and Competitiveness (EMC 2013), Zrenjanin, 21-22nd June 2013. Technical Faculty "Mihajlo Pupin", Zrenjanin, pp. 351-356. ISBN 978-86-7672-202-0

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Abstract

Exchange rate risk occurs in all businesses that have a currency mismatch between assets and liabilities in terms of more or less floating exchange rate. Due to the nature of the work, the exchange rate risk is most pronounced in businesses that are engaged in foreign trade. Consequences of the operations of the borrower arising due to changes in exchange rates, are important because they may have a negative / positive effect on the creditworthiness of the business of the company, which can be expressed through the two most important aspects. First, the negative / positive impact on the income statement and earnings of companies (net result) through the realized and unrealized negative / positive foreign exchange losses and other negative / positive impact on cash flow businesses through increased / decrease the pressure to have to set aside larger / smaller amounts of money for regular servicing obligations. Sector Risk Management and also its credit analysis department for large, medium and small companies, due to the analysis of the financial statements in its comments that required specific comments relating to the exposure arising from FX risk.

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