Suggest some parameters as per the requirement of the management. (5 Mark)

The currency risk is dependent on the Government action and economic development. Some of the parameters to identity the currency risk are as follows: (1) Government Action: The Government action of any country has visual impact in its currency. For example, the UK Govt. decision to divorce from European Union i.e. Brexit brought the pound to its lowest since 1980's. (2) Nominal Interest Rate: As per interest rate parity (IRP) the currency exchange rate depends on the nominal interest of that country. (3) Inflation Rate: Purchasing power parity theory impact the value of currency. (4) Natural Calamities: Any natural calamity can have negative impact. (5) War, Coup, Rebellion etc.: All these actions can have far reaching impact on currency's exchange rates. (6) Change of Government: The change of government and its attitude towards foreign investment also helps to identify the currency risk.