Analysis of currency risks in the countries of the West African Economic and Monetary Union (WAEMU)

Due to the globalization of markets, the internalization of trade, and recent currency crises, currency risks are becoming increasingly important in corporate and international finance. This is because changes in exchange rates are a major source of macroeconomic uncertainty that affects corporate value. The trade structure of the countries of the West African Economic and Monetary Union is based on the export of raw materials, the prices of which are subject to strong fluctuations and a strong currency in this case is considered a tax on exports, which sometimes leads to inflation and balance of payments deficit and, consequently, to increased currency risks. The purpose of this article is to analyze exchange rate risks in all their aspects in the countries of the West African Economic and Monetary Union. Transaction risk, accounting risk, and economic risk are the three categories of exchange rate risk in the WAEMU. These risks, which can manifest long before billing, can be serious and put the survival of a business at stake for many companies. These currency risks are influenced by fluctuations in exchange rates, the actions of state authorities, and some internal factors. Thus, the WAEMU countries face a triple challenge: the nature of risk, its measurement or quantification, and its management.