Cross-border trade comes with one big risk: unpredictable exchange rate volatility. Smart currency hedging protects your profits and maintains steady cash flow, no matter how exchange rates move. Discover how enterprise-grade hedging strategies can shield your business from volatile markets.

DISCLAIMER: The information provided in this article is for general informational purposes only and does not constitute financial advice, investment advice, or any form of professional consultation.

What is currency hedging?

Currency hedging is a financial technique where a company takes measures to protect itself from exchange rate risk. It involves locking in or offsetting future currency exposures so that future income or expenses denominated in foreign currencies won’t be eroded by unexpected shifts in FX rates. In practice, hedging can involve derivatives such as forwards, futures, or options, as well as simpler approaches like multi-currency accounts or natural hedging via matching foreign-currency revenues and costs.

Exchange rate volatility – the overlooked risk

Exchange rate volatility is a major but often under-appreciated risk for internationally active firms. A 2025 survey of UK SMEs by Bibby Financial Services found that 54% of trading SMEs suffered losses from volatile currency movements in the past year, with an average loss exceeding £53,000 per firm. Moreover, around two-thirds of SMEs report losses of more than 5% directly attributed to exchange rate volatility.

For larger firms, currency effects are also material: companies converting foreign earnings or maintaining foreign-currency denominated assets/liabilities face “translation” or “economic” risk, which means that their consolidated financial results can swing dramatically simply due to exchange-rate moves.

amnis combines enterprise-level currency hedging with low-cost international payments

With amnis, companies can hedge currencies through multi-currency accounts, forward contracts, and more, while also accessing competitive FX rates and low transaction fees for international payments. Find out how much you can save from day 1 with our savings calculator.

When should you engage in currency hedging?

Hedging can be valuable when you anticipate repeated foreign-currency transactions: over many transactions, even moderate FX shifts can add up meaningfully. You should consider hedging when any of the following conditions apply:

How to build an effective currency hedging strategy?

An effective hedging strategy should be grounded in a clear understanding of exposure and risk tolerance. These 4 steps help you structure your currency hedging strategy.

1. Assess your exposure

First of all, map all sources of foreign-currency exposure in your business. This includes: export revenues, import costs, foreign-currency receivables/payables, overseas subsidiaries, foreign-denominated debt or investments. Then quantify these exposures by currency, maturity (when payments occur), and size – ideally converting them into a common base currency (e.g. your home currency) to gauge total FX-risk exposure.

This step is crucial: without knowing how much exposure you have and in what currencies, any hedging plan risks being either over-hedged (costly) or under-protected. For larger and diversified exposures, firms often apply quantitative models to estimate potential losses under unfavorable swings.

 2. Define risk tolerance

Once exposure is known, decision-makers must decide how much fluctuation they are willing to accept:

These judgments will drive how aggressively you hedge, from fully locking in rates (low tolerance for variability) to partial hedging or selective hedging (more tolerance). Firms often set clear policies, e.g. hedge 70% of exposure, or only hedge when expected volatility exceeds a certain threshold.

3. Choose suitable instruments

Depending on your exposure, time horizon, and risk aversion, different hedging instruments may be appropriate:

4. Monitor and adjust regularly

An effective currency hedging strategy is never a “set-and-forget” exercise. Because exchange rates shift constantly, interest-rate decisions must evolve alongside your business exposure. Monitoring ensures that the instruments you’ve put in place continue to match actual cash flows, contract volumes, and market realities.

Foreign exchange alerts are one of the most efficient tools for staying ahead of volatility. By setting automated notifications when rates hit predefined thresholds, you can react quickly through limit orders or forward contracts. Regular reviews also help identify mismatches, expired hedges, or unnecessary positions that may be costing money.

Effective currency hedging with amnis – control all your finances from one single dashboard

If you’re looking for a centralised solution to manage exposures, track FX rates, and implement currency hedging, all while making global payments at local costs, amnis provides a single, comprehensive platform to safeguard your financial health.

Join the amnis ecosystem to benefit from enterprise-grade hedging tools and execute global transactions at local costs.

Melina Fullin · Marketing Project Coordinator

Melina, Marketing Project Coordinator at amnis, has a strong background in content creation and communications, with a keen eye for trends and updates in global business. She researches and shares actionable insights on the FX market, international payments, and cross-border business topics through our blog and FAQ pages.

Her mission is to help companies stay informed, understand the complexities of international finance, and turn knowledge into practical decisions for their business operations.