Economic risk (general)
An organisation can face exposures from inflation, recession, interest rates, trade conditions and other economic developments. The impact depends on its transactions, customers, costs, financing and ability to respond. This broad category is not identical to economic currency exposure, which focuses on longer-term exchange-rate effects on competitiveness and cash flows. Identify the mechanism and relevant horizon, and assess combined exposures rather than treat every macroeconomic change as an equal loss. Some developments can also create opportunities for particular stakeholders.
Worked example
A retailer faces weaker demand during a downturn while borrowing costs rise. An importer also faces exchange-rate effects. The exposures should be separated and assessed together without calling every effect economic currency risk.
Common mistake
Routing a broad macroeconomic-risk definition only to a foreign-exchange term or assuming an adverse headline guarantees a loss for every business.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FM | Supporting | September 2026–June 2027 |