Transaction Exposure is also known as Economic Exposure. It is the risk faced by companies who trade internationally or do business globally. Transaction Exposure occurs when exchange rates change after firms have already signed a financial obligation contract. Thus, transaction exposure can be denied as the loss caused by exchange rates when a firm’s Accounts Payable and/or Receivable are denominated in foreign currency.

Transaction exposure is the risk a company takes when dealing with financials oversees and with foreign currencies.

Transaction exposure is the risk taken on by companies that involve themselves in international trade. The risk is exchange rates fluctuating after companies have committed to certain financial obligations. The exposure of the changing rates can lead to substantial financial losses for companies. Companies can feel exposed since they involved in contracts that have not yet been settled and as a result lead to gains and losses. Since the contracts have already been entered into the Financial Accounting Standards Board (FASB) requires them to be reported on financial statements.