AI in Managing Foreign Exchange Risks in Cash Management

Paper discusses the use of artificial intelligence in managing foreign exchange risks as part of cash management strategies, particularly for multinational firms. One of the significant challenges to international financial stability includes FX risks brought about by the fluctuations in currency exchange rates. Forward contracts, options, and hedging strategies have proved to be traditional methods that can viably handle these problems. Still, they lack flexibility and the required accuracy within the unpredictable and highly fluctuating financial markets of today. AI technologies offer advanced predictive analytics, real-time data processing, and automated decision-making capabilities that can be embedded within these traditional approaches. Integration of such thereby allows firms to better predict and react to market changes given more accurately stabilizing relevant cash flows and reducing earnings volatility. The impact of AI on FX risk management is underscored in this paper by way of a critical review of literature and case studies.