Exposure
Exposure · Degree of Risk Exposure
How much a company or portfolio is exposed to a specific risk — sector, currency, geography, customer, or supplier — and how large the impact would be if that risk materialized.
What it is
Exposure measures the degree to which a company's results or portfolio value depends on a specific factor. The most common types:
- →Sector exposure — what share of revenue/value is tied to a single industry
- →Geographic exposure — share tied to a specific country or region (regulation, political risk)
- →Currency exposure — sensitivity to exchange rate movements (see currency mismatch in reporting)
- →Customer/supplier concentration — what share of revenue (or inputs) is tied to a single partner
The degree of exposure is usually expressed as a percentage of revenue, profit, or assets tied to the given factor.
Why track it
High concentrated exposure increases tail risk — a single event (trade war, regulatory intervention, loss of a key customer) can disproportionately impact the entire business. Diversified exposure across geographies, sectors, and customers reduces the risk of a single failure, but often at the cost of lower focus on what the company does best.
Real-world example
A company with ~19% of revenue from one foreign market has both geographic and regulatory exposure simultaneously — trade policy or a weakening of the local currency directly affects margins and demand without anything changing in the domestic market.