Economic risk refers to the potential for financial loss due to changes in the economic environment that can impact an entity's operations and profitability. This type of risk can arise from various factors, including fluctuations in currency exchange rates, shifts in interest rates, inflation, and changes in government policies. Understanding economic risk is crucial for businesses operating in international markets, as these factors can directly influence currency risk management strategies.
congrats on reading the definition of Economic Risk. now let's actually learn it.