Types of Forex Risks

Transaction Risk: The risk of losses or gains resulting from changes in exchange rates between the transaction date and settlement date of a foreign currency transaction.
Translation Risk: The risk of changes in the value of foreign currency-denominated assets, liabilities, revenues, and expenses when they are translated into the reporting currency for financial statement purposes.
Economic Risk: The risk of adverse effects on cash flows and profitability due to changes in exchange rates that impact a company’s competitive position, sales, costs, or investments.
Contingent Risk: The risk arising from uncertain future cash flows denominated in foreign currencies, such as contingent liabilities, commitments, or firm contracts.