Amanda is the purchasing manager for AB Construction based in France. She is considering purchasing an asset from overseas but knows she must account for fluctuations in exchange rates in the contract. Is Amanda correct?
A.
No, as it will be better to purchase the asset in AB Construction's local currency as it would be efficient and more stable
B.
Yes, as AB Construction could pay more for the asset than intended and Amanda should include a currency fluctuation clause
C.
No, as the price can be re-negotiated post-contract sign-off by AB Construction and the supplier
D.
Yes, as Amanda will be able to decide the currency exchange rates to be used
Including a currency fluctuation clause protects against exchange rate volatility, which can increase the final cost if the currency depreciates. Whole-life asset management often incorporates such risk management measures to ensure cost predictability and avoid unanticipated financial impact on long-term projects.
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