The Australian Government's foreign exchange risk management policy has been in place since 1 July 2002. This policy applies to all Commonwealth entities in the general government sector (GGS). The policy applies to both departmental and administered funding.
Foreign exchange risk is the risk that an entity's financial performance or position will be affected by fluctuations in the exchange rate between the Australian dollar and other currencies. The overarching principle of the policy is that GGS entities are responsible for the management of their foreign exchange risks. However, the entities must not act to reduce the foreign exchange risk that they would otherwise face in the course of their business arrangements.
To assist GGS entities in managing foreign exchange risk, Finance has published the Australian Government Foreign Exchange Risk Management Guidelines, which provide in-principle guidance to entities, and may also be used as a benchmark to assess entities' foreign exchange risk management practices.