Exposure to exchange rate risk
If the foreign currencies to be received by an MNC suddenly weaken against the domestic currencies, the MNC will receive a lower amount than was expected.
This may reduce the cash flows of the MNC.
Uncertainty of an MNC’s Cost of Capital
If there is suddenly more uncertainty surrounding its future cash flow, investors may only be willing to invest in the MNC if they can expect to receive a higher rate of return.
Consequently, the higher level of uncertainty increase the return on investment required by investors, and the MNC’s valuation decreases.