Managing Exchange Rate Risk in Not-for-profit Non-governmental Organizations

The paper explores the effective design of management control systems in terms of managing exchange rate risks for not-for-profit non-governmental organizations (NGOs). Compared to business organizations, NGOs have just limited possibilities to tackle these risks for several reasons discussed in the paper. The paper focuses on effective design of control system to manage the exchange rate risk. The basic theoretical framework is described, same as the terminology used by NGOs to set up the financial report to their donors when having to convert the project expenses from primary to reporting currency. Then, based on the case study, various reporting procedures are discussed in terms of their advantages and disadvantages related to exchange risk exposure of both the project itself and organization as a whole. Finally, the recommendations are proposed how NGOs should set their control systems in order to manage their exchange rate risk effectively.