Why would an entrepreneur find it desirable to hedge his or her foreign exchange risk?

What will be an ideal response?

An entrepreneur would find it desirable to hedge foreign exchange risk because the profits from the entrepreneurial venture are a significant part of the entrepreneur's wealth. Unlike regular investors, entrepreneurs are unable to diversify away such risks through transactions in their own portfolios. Hence, if forward rates are unbiased predictors of future spot rates, risk-averse entrepreneurs will choose to hedge their future foreign currency cash flows because doing so will reduce the variance of the flows without changing their expected values in the domestic currency. Therefore, reducing the variance of future profits would increase the entrepreneur's expected utility.