Just as we can suffer when we’re exposed to the elements, so can our currencies on the international stage.
Economic exposure refers to unexpected fluctuations in a firm’s piggy bank (foreign investments, future estimated cash flows, etc.) thanks to currency turbulence. In order to use the dramatic term that “economic exposure” is, a company’s market value must be impacted by currency fluctuations in the long term (short-term blips don’t count).
Companies can protect themselves with the SPF-equivalent to currency fluctuations: investing in foreign exchange markets to offset risk. That way, when things might be going bad for a company at home, their investments abroad—invested in the opposite trends—will be doing well. Probably. (If the global economy takes a slump, well...that’s another story.)
For instance, an American company selling those rainbow hats with the spinners on them, at home and abroad. They sell a lot of these to Europe. The American hat company forecasted their cash flows, only to be hit by currency depreciation in the euro, which dropped in value compared to the US dollar. That means their income coming from Europe just took a dive in value, which means less money in their pockets.
That economic exposure can burn. Hopefully, the hats help.