The economic exposure is usually determined by two factors −
● Whether the markets where the company inputs and sells its products are competitive or monopolistic? Economic exposure is more when either a firm’s input costs or goods’ prices are related to currency fluctuations. If both costs and prices are relative or secluded to currency fluctuations, the effects are cancelled by each other and it reduces the economic exposure.
● Whether a firm can adjust to markets, its product mix, and the source of inputs in a reply to currency fluctuations? Flexibility would mean lesser operating exposure, while sternness would mean a greater operating exposure.
