Foreign exchange: rate risk not key investment criteria.

• Author: Marshall, Jeffrey
• Position: BusinessBriefs - Foreign investments

Foreign exchange (FX) rate issues have become more important in recent years, especially in emerging markets, but businesses appear to look through exchange rate volatility to focus on key market opportunities. So finds a new, far-ranging study released by The Conference Board in conjunction with The Group of Thirty, a private nonprofit, international group dedicated to increasing understanding of critical global economic and financial issues.

Global businesses take exchange rates into consideration in making investment decisions, but market opportunity, political risk and the legal environment are all more important for foreign investment decisions than exchange rate risks, the study found.

Global markets are important to growth, and few firms in any geography, including emerging markets, forgo foreign investment because of exchange rate volatility. Exchange rate risk may come into play when assessing market opportunity; but it does not appear to be, in and of itself, a deterrent to investment, except in the case of outright currency crises.

This study, based on a survey of nearly 400 CEOs and CFOs in 38 countries in every major region of the world, examined an array of business investment drivers to identify the relative role of exchange rates. Over 80 percent of the responding companies indicated that market opportunity was "very important," over 60 percent cited political risk and 50...