In this study we present a model derived using fuzzy sets theory to measure the firm's exposition to economic exchange risk. In order to overcome the shortcomings of accounting in capturing the exchange risk phenomenon, this model evaluates approximately the effects of variations in real exchange rates on operational income and the competitive position of the firm. In this model operational income depends on the effects of variations in real exchange rates on operational benefits and costs. Operational benefits and costs are both analyzed as a double variation in prices and quantities. In what concerns the effect of variations in real exchange rates on the competitive position of the firm, we consider that it depends mainly on observed variations in the relative costs of competitors and their market shares. In order to test empirically the model we study the case of a strategic business unit of yarns in a large textile enterprise.
fuzzy logic model; economic foreign exchange risk; strategic management accounting; case study in Portugal
