Mckinsey: Risk: Seeing around the corners

In 2007, the Canadian dollar’s value rose 30 percent against the US dollar. Canadian producers knew they would be less competitive in the United States, but few understood that these changes would also affect the buying behavior of Canadians, 75 percent of whom live within 100 miles of the border. As consumers merrily headed south to buy cars, snowmobiles, and the like, Canadian companies had to cut prices in their domestic market. Hedging to cover their loss of competitiveness in the United States couldn’t protect them from the price squeeze at home. There’s no formula for anticipating how risk will cascade through economies, but in very uncertain times, executives must learn to foresee and prepare for it. Read more

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