Because 83 percent of consolidated sales are of international origin, fluctuations in exchange rate pose a critical risk for Avon. For the majority of avon'S international operations, the local currency is used as the functional currency. As a result, exchange rates have a significant impact on Avon's earnings, assets, cash flow, and financial position. To mitigate the risk of exchange rate fluctuations, Avon "implements foreign currency hedging and risk management strategies to reduce exposure to fluctuations in earnings and cash flows.