What steps can management take to contain risks of an over valued currency?

"It is for this reason that UK companies responded to the appreciation of sterling in the late 1990s by increasing the proportion of imported inputs. Car manufacturers such as Toyota and Nissan that had UK plants and large EU sales, shifted sourcing of components to eurozone countries"





Source: Corporate Financial Accounting and Reporting - 2nd Edition by Tim Sutton (P.483)





How does increasing imports influence business in the valuation of a currency? Does it force businesses (importers / exporters) to increase their balances in the respective foreign currency?|||The question assumes that something can be "over valued". Values are highly subjective - for every person who thinks something is overvalued and sells it, someone else thinks it's undervalued and buys it. This is true for all markets.





Management can hedge against currency fluctuations through the use of forwards, futures, options, or some combination of these.