Company: RSKD
Filing Date: 2025-03-06
Form Type: 20-F
Source: 0001851112-25-000006
Chunk: 181

Company: RISKIFIED LTD.
Filing Date: 2025-03-06
Form: 20-F
Item: Item 11
Chunk 181
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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to a number of risks arising from our normal business activities. These risks principally involve the possibility of foreign currency exchange risk that may result in unfavorable foreign currency translation adjustments, foreign currency transaction gains and losses, and changes in interest rates that may adversely affect the value of our financial assets and liabilities or future cash flows and earnings. The following provides qualitative and quantitative information regarding these risks.

Foreign Currency Exchange Risk

The U. S. dollar is our functional currency and the functional currency of a majority of our subsidiaries. Our revenue is largely denominated in U. S. dollars, and a portion of our revenue is denominated in foreign currencies, in particular the Euro ("EUR"). Additionally, a significant portion of our operating costs in Israel, consisting principally of compensation and benefits related costs, and overhead costs, are denominated in New Israeli Shekel (“ NIS”). This foreign currency exposure, which we expect to persist, gives rise to market risk associated with exchange rate movements of the U. S. dollar against the EUR and NIS, respectively.

To reduce the impact of foreign exchange risks associated with forecasted future cash flows and the volatility in our consolidated statements of operations, we have established a hedging program. We utilize foreign currency contracts, primarily forward and option contracts, with financial institutions to protect against foreign currency exchange risks, mainly the exposure to changes in the exchange rate of the EUR and NIS against the U. S. dollar that are associated with future cash flows denominated in EUR and NIS. We do not enter into derivative instruments for trading or speculative purposes. We account for our derivative instruments as either assets or liabilities and carry them at fair value in the consolidated balance sheets. The accounting for changes in the fair value of the derivative depends on the intended use of the derivative and the resulting designation. Our hedging program reduces but does not eliminate the impact of currency exchange rate movements. We may in the future enter into other derivative financial instruments if it is determined that such hedging activities are appropriate to further reduce our foreign currency exchange risk. The effect of a hypothetical 10% change in foreign currency exchange rates would impact our future results by approximately $0.1 million and $0.1 million as of December 31, 2024 and 2023, respectively.

Interest Rate Risk

We had cash, cash equivalents, and short-term deposits of $376.1 million as of December 31, 2024