Managing foreign exchange risk on international construction projects

Managing the foreign exchange risk is critical to achieving financial success on many international construction projects. Every transaction that crosses national borders results in exposure to foreign exchange risk. Without proper management, a small movement in the currency exchange rate can turn an international project from a profit to a loss. This paper addresses the primary foreign exchange risks, translation and transaction risks, and suggests strategies for managing these risks. A case study is presented illustrating the application of foreign exchange exposure management during the life of an international construction project.