Transaction Risk
Short definition
Transaction risk is the FX move, between invoice or commitment and settlement, that disturbs cash. The cash rate on collection or payment day diverges from the invoice rate.
Detailed explanation
Receivables stay open for DSO, payables for DPO. The order book creates exposure before invoicing. A tenor-matched forward locks that cash.
A USD invoice in a TRY functional entity is transaction risk; intra-group balances can shrink it by netting. Revaluation P&L is an accrual before cash settlement.
Why it matters for the CFO
Margin looks locked on invoice day; the collection-day rate eats contribution. The 13-week budget sees it on the cash line.
How to read it
Open transaction position = unmatured FX receivables − FX trade payables ± firm orders. The hedge ratio may sit below 100 because of cancellation risk.
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What to learn next
Definitions are educational. They are not investment, credit or tax advice.