How can currency exchange risk impact international logistics?

Currency exchange risk significantly impacts international logistics primarily by affecting the costs of goods and profitability for companies engaged in global trade. When businesses operate across different countries, they often deal in multiple currencies. Fluctuations in exchange rates can lead to changes in the overall costs of purchasing goods from suppliers and in pricing products for customers in foreign markets.

For instance, if a company agrees to pay a supplier in a foreign currency and that currency strengthens against the company's base currency, the effective cost of the goods increases. This can reduce profit margins if the company is unable to pass on the increased costs to its customers through higher prices. Moreover, businesses need to consider these risks when budgeting and forecasting, as an unfavorable move in exchange rates can lead to unexpected financial losses.

In contrast, delays in shipping times, increased packaging costs, or changing delivery routes may be influenced by a variety of operational factors but are not directly tied to currency fluctuations. These elements might cause logistical complications, but they do not inherently relate to the financial impacts that currency exchange variations introduce into the supply chain.