Small businesses like Alliance Design Concepts are great examples that show a foreign currency exchange rate fluctuation that can impact the company's profitability. Small businesses need to understand the risks they face when operating internationally. Very often the value of the exchange rate will not work in their favor. In Alliance's case, because they used an international supplier, they needed to ensure they had converted all equipment costs from USD to CAD. The exchange rate fluctuation caused a direct decrease of 8.2% in pre-tax margin on equipment for Alliance. Similarly Macdonald's sales in Europe increased in 2011, however annual profit decreased due to the weakening of the euro. Even small fluctuations in the exchange rate can cost companies a loss in exchange rate returns. In my opinion, small businesses such as independent travel agencies can be impacted the most when the exchange rate fluctuates. Travelers to and from foreign countries need to convert money into that particular country's currency so that they can have enough funds to visit places, stay in hotels, and do other things. When the dollar appreciates against the euro or another major currency, American tourists will enjoy it more, because the exchange rate will be in their favor. The downside is that if you travel to the United States, travel agencies will most likely have fewer foreign travelers due to the exchange rate fluctuation. When companies like Alliance Design Concepts do business with suppliers or customers who operate in different countries, it is very important to understand and share the currency risk with others... middle of the paper... if you If you know the currency you are using you're dealing with fluctuates about 3% per year against the US dollar, you could easily charge 3% more for the product or services you offer in that country, especially the US in my example. By charging 3% more, you will get a base price if the currency drops 3%, and if the currency drops less than 3%, the company will get extra income. No one knows the best practices on how to mitigate currency risk, but every business still has some strategies it can implement to reduce risk and increase profit. Overall, currency risk is something that every company should be able to deal with in a global economy, as long as it is not afraid to embrace strategies that sometimes take a little longer to see results or that can fail. Done.