Your FX risk management strategies shouldn’t be based on a generalized idea of currency risk; they need to fit your organization’s unique risk profile.
June 17, 2020 — 3 min read
Last week, we encouraged businesses like yours to look beyond currency exchange rates when developing your foreign exchange risk management procedures. This week, we want to take that discussion a little further: what else is out there for businesses looking to improve their FX risk management?
One common misconception is assuming that FX risk management is more narrow than it is. That is to say, many businesses might think that any FX strategy beyond purchasing the required currencies at the current spot rates would be currency market speculation. The truth is, there is a wide range of foreign exchange tools for businesses to reduce their risk exposures and improve their operations.
Of all of the FX strategies and tools, hedging may be the most widely misunderstood. It’s a common misconception that currency hedging serves to second-guess how foreign exchange markets could potentially move in the coming days and weeks, but that’s not its. In FX risk management, hedging is a valuable tool to help insure the business against possible unfavorable movements caused by market volatility. It’s one aspect of a comprehensive FX risk management plan, not the entire strategy.
Like any other strategy, the importance of hedging for your business depends on your business and its exposures. Depending on your FX risk exposures, your organization may not need to make hedging a central part of its risk management plans. Your FX risk management strategies shouldn’t be based on a generalized idea of currency risk; they need to fit your organization’s unique risk profile.
In short, this will depend on the FX provider. When researching FX providers, don’t just ask them about the rates they offer or what kind of advice they can provide on hedging strategies. Take some time to read up on the full suite of products and services they offer, and consider whether they would be valuable for your business both in the day-to-day and in the long-term.
At Xe, we offer a number of products and services to businesses to aid in their international payments as well as their FX risk, available as a standalone or exchange rate API. Some of our products include:
FX Risk Management
Don’t go too far—in the coming weeks, we’ll be taking a closer look at our business offerings and the benefits they could bring to your operation.
Want to hear more about them today, right now? Visit our Business page for more information about our products and services.