FX Risk for Importers: Protect Your Margins in 6 Steps

Key takeaways

• Exchange rate moves can materially change import costs and margins when you buy in foreign currency but sell in your home market.¹ ²

• Many smaller firms still manage FX risk informally, which can make costs less predictable when rates move quickly.³

• A simple six-part playbook can reduce surprises without adding heavy complexity.

If you import goods or raw materials, you are exposed to foreign exchange risk. Your supplier quotes in a foreign currency, but your costs and selling prices are in your home currency. When the exchange rate moves between order and payment, your margin moves too.

Research on exchange rate pass-through shows import prices often react meaningfully to currency shifts, and imported input costs can move close to one-for-one in the short run when foreign prices are sticky.¹ ² Many SMEs still handle this exposure in an ad hoc way, even though relatively small FX moves can matter when margins are thin.³

Here is a straightforward playbook to protect your margins without turning into a full-time FX trader.

1) Map your FX exposure

Start by answering three questions:

• What currencies do you buy in?
  For example USD for electronics, EUR for machinery, JPY for components.

• How much per year in each currency?
  Rough numbers are fine. Use last year’s invoices if needed.

• How long is the gap between order and payment?
  Some suppliers want deposits or prepayment. Others offer 30 to 90 day terms.

Once you can see your biggest currency lanes and your typical timing gaps, you’ll know where risk is real and where it’s just noise.

2) Understand how FX hits your margin

Use a single product example.

Suppose you import a component that costs 100 in supplier currency. At today’s rate, that equals 120 in your home currency and your planned gross margin is 25%.

If your currency weakens by 5% by the time you pay, your cost might rise to 126. Unless you raise prices, your margin shrinks.

The goal is not to eliminate all FX risk. It is to decide which deals you want to protect and how much movement you can tolerate before profit starts getting squeezed.¹ ²

3) Pick a simple FX approach that fits your business

Most importers end up using one of these three approaches:

• Accept spot risk
  Convert when you pay, at whatever rate is available. Simple, but risky for larger orders.

• Price with a buffer
  Add a cushion to cover normal FX movement. Works until volatility exceeds your buffer.

• Cover committed orders
  Keep small or flexible flows on spot, but lock rates for bigger, known payables.

A practical middle ground is to cover a portion of committed imports (for example, your largest scheduled payments) and keep the rest flexible for changing volumes or timing.

4) Use simple tools, not complex products

Most SME importer exposure can be managed with three basic tools:

• Multi-currency accounts
  Hold foreign currencies like USD or EUR and pay suppliers directly instead of converting invoice by invoice (multi-currency accounts.

• Spot conversions with transparent pricing
  When you do use spot, focus on total cost clarity, not just the headline rate.

• Forward contracts
  Lock an exchange rate today for a future payment you already know you will make, such as a shipment in three months (forwards (https://www.xe.com/business/forwards/)).³

These tools are generally about predictability, not trying to “beat the market.”

5) Improve payment timing and process

FX risk and payment friction often show up together.

A few operational improvements that help:

• Align payment terms and coverage
  If a supplier gives you 60 days, consider matching your FX approach to that due date rather than waiting until the last moment.

• Batch invoices by currency
  When practical, pay multiple invoices together so you reduce admin effort and limit repeated conversions (batch payments.

• Schedule payments to due dates
  Reduce last-minute conversions and rushed approvals.

Better process does not just save time. It helps you avoid making currency decisions under deadline pressure.

6) Write a one-page FX policy

Capture decisions in a short policy so purchasing and finance follow the same rules.

Include:

• Which currencies and annual volumes trigger review before signing new contracts

• A threshold for “must-review” orders (for example, any single foreign-currency invoice above a set amount)

• Preferred tools (wallets for repeat flows, forwards for large one-off payments)

• Who approves FX decisions and how they are recorded

Even a lightweight policy reduces inconsistent decision-making across teams.³

FAQ

Is it worth hedging small orders?

Usually not. Focus on larger, predictable payments where a move would actually change outcomes.

What if my supplier will only quote in my currency?

That can simplify things, but suppliers may build in their own cushion. If possible, compare all-in pricing across both currency options.

Can hedging cause losses?

If rates move in your favor after you lock a rate, you will not benefit on the hedged portion. The point is stability, not winning.

Conclusion and how Xe can help

Importing will always involve uncertainty. FX does not need to be the part that surprises you. With a clear view of your exposure, a consistent approach, and simple tools, you can protect core margins and spend more time on suppliers and customers rather than rates.

Xe Business helps importers manage FX and payments through multi-currency accounts, spot and forward options, and workflow tools like batch and scheduled payments. Learn more at Xe Business or talk to our team if you want to map your import flows into a repeatable process.

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The content within this blog post is for informational purposes only and is not intended to constitute financial, legal, or tax advice. All figures and data are based on publicly available sources at the time of writing and are subject to change. Actual conditions may vary depending on location, timing, and personal circumstances. We recommend consulting official government resources or a licensed professional for the most up-to-date and personalized guidance.

Citations

¹ Federal Reserve Bank of New York, Staff Reports No. 149 — “Exchange Rate Pass-Through into Import Prices” — (2002)
² Bank for International Settlements — BIS Working Papers No 1266 — “Firms in a global economy: pricing, inputs and exchange rates” — (2025)
³ UBS — “Currency hedging: tips for SMEs” — (2025)

The information from these sources was taken on December 18, 2025.