Lessons 6.1 to 6.3 taught two separate risks a new order can carry: foreign exchange risk, where the order's sale currency differs from the factory's own cost currency, and guarantee cost, the fee a factory pays to hold a bank's promise open for a buyer. A complete financial risk sheet puts both risks, where each applies, on one page before an order is confirmed, so nothing is discovered only after the fact. Some rows apply only to a foreign-currency order; a purely domestic order, like Delta Garments' own sale to Cedar & Co., correctly shows an empty FX row, not a missing one. This lesson mainly teaches the decision flow: assembling a complete risk view before an order is approved, not after.
You need: lesson 6.1's FX exposure calculation, lesson 6.2's exposure-reduction methods, and lesson 6.3's guarantee fee calculation, all built on illustrative figures.
By the end of this lesson you can:
Not covered here: any lesson beyond this course; Track 15, Course 4 (working capital) is a related but separate risk view.
| Term | Meaning |
|---|---|
| Financial risk sheet | A single document listing every financial risk a new order carries, currency exposure and guarantee cost among them, with each row filled in only where it applies. |
| Foreign exchange (FX) risk | The risk that a currency move between two dates changes what a fixed foreign-currency price is worth in the factory's own local currency. |
| Bank guarantee | A bank's promise to pay the buyer up to a fixed amount if the factory fails to meet its own contract obligation. |
| Applicable row | A row on a risk sheet that genuinely applies to the order being assessed, filled in with a real or illustrative figure. |
| Not applicable row | A row on a risk sheet correctly left empty because the risk it covers does not exist on this particular order. |
| Illustrative exchange rate | A clearly labelled example rate used to teach a calculation, never a real current market rate for any real currency pair. |
Every new order should be checked against the same set of risk rows before it is confirmed: an FX exposure row, filled in only if the sale currency differs from the factory's own cost currency; a guarantee row, filled in only if either side has asked for one; and a payment-method risk row, cross-referenced to Track 15, Course 1. An order that needs none of these still passes through the same checklist, simply leaving every row empty, which is itself useful information: the order carries none of these risks.
| What can differ | The shapes you will meet | Why it matters to you |
|---|---|---|
| Export order, foreign currency, no guarantee needed | A small, quick reorder of Order A's own shape, paid promptly, may carry FX exposure worth noting but no guarantee request from either side. | The FX row is filled in; the guarantee row is correctly left empty, not filled with a zero disguised as a real figure. |
| Export order, foreign currency, guarantee needed | Order B (the jeans), paid partly by letter of credit, can carry both an FX row and a guarantee row together, as lesson 6.3 already showed for a related case. | Both rows are filled in independently; one risk's presence does not imply the other's. |
| Domestic order, no foreign currency, guarantee needed | Cedar & Co.'s own large forecast order, entirely in local currency, still carried a guarantee row in lesson 6.3. | The FX row is correctly left empty; the guarantee row is filled in on its own, unrelated reasoning. |
| Domestic order, no foreign currency, no guarantee needed | Delta Garments' own routine, smaller domestic sales to Cedar & Co. under the standing 60-day open account carry neither row. | A risk sheet with every row empty is not an unfinished sheet; it correctly reports an order with neither risk. |
Before quoting a new batch of Order A's own T-shirt shape, Mona builds a financial risk sheet twice: once for an export version sold to Northline Apparel in USD, and once for a domestic version of the same T-shirt shape sold to Cedar & Co. in local currency. The export version carries a filled FX row, since the sale currency (USD) differs from Delta Garments' own cost currency; the domestic version carries an empty FX row, since both sides already use the same local currency throughout. Neither version, in this case, needs a guarantee, since neither buyer has asked for one on this particular batch.
The worked numberA financial risk sheet with a genuinely empty FX row, for a purely domestic order, or a genuinely empty guarantee row, for an order neither side asked to guarantee, is a complete and correct sheet, not an unfinished one. A reader used to seeing every row filled in on other sheets can wrongly assume an empty row means the preparer forgot something, and may invent a figure, an assumed exchange rate on a domestic order, or a guarantee fee nobody requested, just to fill the space. This invented figure is worse than an honest blank, since it reports a risk that does not actually exist on the order, and can lead a later reader to recommend a hedge, or price in a fee, for a risk the order was never actually carrying in the first place. A reviewer checking a completed sheet should ask, of every empty row, whether it is empty because the risk genuinely does not apply, or empty because nobody has checked yet; only the first reason is an acceptable, finished state for that row.
Before Delta Garments confirms a new order, it is worth checking the same short list of financial risks every time: does the sale currency differ from the factory's own cost currency, and does either side want a bank guarantee. An export order paid in a foreign currency gets its currency row filled in; a domestic order paid in the same currency the factory already uses correctly leaves that row empty. A guarantee row is filled in only if someone has actually asked for a guarantee, export or domestic, and left empty otherwise. Putting both checks on one sheet before the order is confirmed means nothing is discovered for the first time only once payment or delivery is already underway.
A new merchandiser, building a financial risk sheet for Cedar & Co.'s next domestic order, notices the export version of the same sheet, for Order A, has a filled FX row, and adds an assumed exchange rate to Cedar & Co.'s own sheet too, reasoning that every risk sheet should look complete.
Here is the row the merchandiser is questioning:
Should an exchange-rate figure be added to Cedar & Co.'s domestic risk sheet? Decide before opening the answer.
No, the row should stay empty, and the assumed rate should be removed. Two facts decide this together.
First, Cedar & Co.'s sale currency and Delta Garments' own cost currency are the same. There is no exchange rate standing between the two, since no conversion ever happens on this domestic order; there is nothing for an exchange rate to describe.
Second, an assumed rate on a domestic order is not a neutral placeholder; it reports a risk that does not exist. Anyone later reading the sheet would reasonably conclude Cedar & Co.'s order carries currency exposure, and might even recommend a forward contract for a domestic sale that has nothing to hedge.
The merchandiser's instinct toward consistency across sheets is reasonable, but consistency here means applying the same checklist, not forcing the same filled-in rows regardless of whether they actually apply.
Framed qualitatively, an assumed exchange-rate row on Cedar & Co.'s domestic order could lead a reader to recommend a forward contract, and its own small bank fee, to hedge a currency exposure the order never actually carried.
An invented row can cost real money, an unnecessary fee, on a risk that a correct, empty row would have shown never existed.
Open the Financial risk sheet workbook linked below. Its "Risk summary" sheet lists an FX exposure row, a guarantee fee row and a payment-method reference row, and sums the rows that apply. Fill in the yellow "Your order" column only for the rows genuinely applicable to your own new order, leaving the rest empty, then review the total before the order is confirmed.
[Download the Financial risk sheet](../../templates/T15-C06-financial-risk-sheet.xlsx)
1. A domestic order between Delta Garments and Cedar & Co. is priced and paid entirely in local currency. What should its financial risk sheet's FX row show?
2. A new order is priced in USD, and the buyer has also requested a performance guarantee. What should its financial risk sheet show?
3. A new order is priced in USD at 8,000 pieces x USD 2.50, confirmed at an illustrative rate of 25, converted later at an illustrative adverse rate of 24. What FX-row figure belongs on its risk sheet?
| EN | AR | FR | TR | Meaning |
|---|---|---|---|---|
| Financial risk sheet | كشف المخاطر المالية | Fiche de risque financier | Finansal risk tablosu | A single document listing every financial risk a new order carries, currency exposure and guarantee cost among them, with each row filled in only where it applies. |
| Foreign exchange (FX) risk | مخاطر الصرف الأجنبي (FX) | Risque de change (FX) | Kur riski (FX) | The risk that a currency move between two dates changes what a fixed foreign-currency price is worth in the factory's own local currency. |
| Bank guarantee | خطاب ضمان بنكي | Garantie bancaire | Banka teminat mektubu | A bank's promise to pay the buyer up to a fixed amount if the factory fails to meet its own contract obligation. |
| Applicable row | بند منطبق | Ligne applicable | Geçerli satır | A row on a risk sheet that genuinely applies to the order being assessed, filled in with a real or illustrative figure. |
| Not applicable row | بند غير منطبق | Ligne non applicable | Geçerli olmayan satır | A row on a risk sheet correctly left empty because the risk it covers does not exist on this particular order. |
| Illustrative exchange rate | سعر صرف افتراضي | Taux de change illustratif | Gösterge niteliğinde döviz kuru | A clearly labelled example rate used to teach a calculation, never a real current market rate for any real currency pair. |
You have now built a complete financial risk sheet covering currency exposure and guarantee cost for both an export order and a domestic order. This is the final lesson of Track 15, Course 6. Back to the course map