Explain various strategies options available for foreign exchange exposure management.

(a) Four separate strategy options are feasible for exposure management. They are: (a) Low Risk: Low Reward - This option involves automatic hedging of exposures in the forward market as soon as they arise, irrespective of the attractiveness or otherwise of the forward rate. (b) Low Risk: Reasonable Reward - This strategy requires selective hedging of exposures whenever forward rates are attractive but keeping exposures open whenever they are not. (c) High Risk: Low Reward - Perhaps the worst strategy is to leave all exposures unhedged. (d) High Risk: High Reward - This strategy involves active trading in the currency market through continuous cancellations and re-bookings of forward contracts. With exchange controls relaxed in India in recent times, a few of the larger companies are adopting this strategy.