Why is the impact of the risk also different?
This is due to the firm‟s exposure, which simply means the more vulnerable you are, the more
the damage. It is also due to its effect on core objective functions which create value for the
business.
In the case of Infosys, even though 87.7% of its revenue was dollar-denominated in the fiscal
year 2002, its surplus funds was maintained in foreign currency deposits and all dollars
expense were paid in dollar, and though its operating profits was subject to fluctuations dues
to its large proportion of expenses in rupees, its natural forex hedge took care of that.
In the case of Rolls-Royce: they were exposed to a number of foreign currencies, the most
significant being the US dollar and followed by the Euro. It therefore is exposed to various
currency fluctuations that have an impact on its income.