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Question: Planters plc manufactures agricultural implements, components for


Planters plc manufactures agricultural implements, components for which are acquired from a number of sources, including some overseas ones. The implements are marketed in the UK and, increasingly, overseas.
The directors are aware that the business is exposed to exchange rate risk, but in the past have taken the view that this leads to losses and gains at a level that it has been prepared to accept. Recently, the scale of overseas trading has led the directors to consider the possibility of managing their foreign exchange risk exposure.

Required:
Draft a note for the directors explaining how buying and selling in foreign currencies exposes the business to risk. The note should then explain, in reasonable detail, how this risk might be managed in practice.


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