Risk Management of Exchange Rates in International Construction

Abstract

International contractors must consider the substantial risks related to unexpected foreign exchange fluctuation when conducting their business and using foreign currencies in foreign countries. Most international contractors attempt to minimize foreign exchange exposure within a manageable range because it may influence the company's fundamental financial structure, reduce market value or profit margins, or disrupt ongoing and future projects. This research provides a qualitative study of existing foreign exchange exposure (transaction, operation, and translation exposure) and current and effective foreign exchange risk management in American and Korean international contractors, as they represent both new and long-time members of the global construction market. Finally, recommendations of strategies for new and existing international contractors to minimize and better manage foreign exchange risk will be offered.