Briefly justify why transaction exposure is generally considered more critical than translation exposure from a financial risk management perspective.

Transaction exposure is more critical than translation exposure because it directly affects a firm's actual cash inflows and outflows. It arises from contractual foreign currency transactions such as exports, imports, and foreign currency borrowings. Exchange rate fluctuations between the contract date and settlement date can result in real gains or losses, thereby impacting profitability, liquidity, and working capital management. If left un-hedged, in may even create financial distress. In contrast, translation exposure arises from the conversion of foreign subsidiaries, financial statements into the parent company's reporting currency. It is an accounting adjustment that does not involve immediate cash flow movement. Therefore, from a risk management perspective, firms give higher priority to managing transaction exposure.