A currency risk strategy will provide a steady base to work from for companies with a particularly high level of international payments.

Working with providers that can aid in building a currency strategy and planning ahead for large payments with tools like forward contracts, will make a huge difference to the bottom line.

Main points of currency risk

Reducing issues related to large transfers
Reducing issues related to large transfers

Use currency risk strategies to make one-off large transfers. Working with a provider to send money at the right time, at the best price, can make a massive difference to the overall amount of money received.

A solution that is adapted to the nuances of the transaction, businesses, and currencies in question can save a lot of money along the way.

Reducing issues related to regular cross border payments
Reducing issues related to regular cross border payments

As with one-off large payments, using a currency risk strategy can also save on regular or batch transactions in the same way.

For example, incoming payments from subscriptions, or outgoing payments for suppliers, that are regular and around the same amount can form part of an overall strategy that reduces the impact exchange rates can have.

Multi-currency management
Multi-currency management

Managing multiple currencies across markets, for things like expenses, staff payment and suppliers creates a need for multi-layered currency risk.

This can come in the form of multi-currency accounts or IBAN accounts, or even working with a currency broker that can offer wallet options as well.

Long term strategic planning
Long term strategic planning

Above and beyond anything, strategic long term planning is important to the health of a business. Currency risk is no different.

Using a service allows for access to foreign exchange specialists that provide intelligence and experience in moving, and managing international finance for businesses at scale.

View these account specialists as extensions of your team, audit regularly and make informed decisions on when, where and how to move currency.

Paying and managing global budgets
Paying and managing global budgets

A strong currency risk strategy also protects staff.

The right strategy can mean staff that work remotely in other countries, but have a USD or GBP salary for example, are not short changed by exchange rates.

Outside of this, managing elements like international ad spend, paying agencies or budgets for international conferences becomes easier in the local currency.

Types of tools used

Forward Contracts

A forward contract is an agreement to buy or sell an asset (in this case the currency) at a specified future date at an agreed price.

These can be used for regular transactions and larger transactions alike.

Limit Orders

A limit order is an instruction to buy or sell a currency at a specific price or better.

It ensures that the order will only be executed at the desired price, but there is no guarantee that it will be executed if a currency does not reach that price.

OCOs (One Cancels the Other Orders)

An OCO order is a pair of orders placed simultaneously, where the execution of one order automatically cancels the other. This is used to manage risk and lock in profits by setting both a profit-taking and a stop-loss order.

Use an FX audit

An FX audit will identify some key areas of currency risk that can be of focus. This is generally the first stage of putting together a currency risk strategy.

This would look at:

Existing risk management strategy
Exchange rates paid, vs potentials
Currencies used and currencies sent
Timeframes and changes

Overall, this audit would lead to:

  • Reduce impact of FX markets

  • Plan ahead for spending

  • Manage international cash flow

  • Build a strategy for growth

FX Audit and Custom Quote from RegencyFX

Be clear on

When building a currency risk strategy, there are some areas to just be clear on.

Financial risk tools are legally binding contracts that need to be fulfilled.

Financial risk tools, like forward contracts, are legally binding contracts that need to be fulfilled.

Ensure the map of currency risk is clear and due dates are apparent for when anything needs to be closed.

The level of account contact you will receive will differ based on the company.

Some offer dedicated account managers, others just dedicated support.

Where possible, we would recommend dedicated account managers who understand the business over the long term. But it is possible to work with just support as well.

Most currency risk management solutions also have some form of login area.

This can include management of finances, sending individual payments yourself, and raising invoices. Each will be different, some will be end-to-end management of international finance, others just a specific aspect.

Be clear on what you want, and what is offered.

Currency risk tools can also be integrated into business accounts.

Some providers offer plugins for things like Xero, others will provide API access to the accounts themselves.

Again, the approach to take will be based on your currency risk strategy.

The providers

Compare currency risk solutions

The right currency risk partner is different for every business. We always recommend comparing to get a clear picture of what is on offer, vs what it is your business needs.

Use cases

Currency risk strategy is used by thousands of businesses across the world. Here are some examples of where they have been used.

Recapping currency risk

  • Use an FX audit to identify opportunities within a currency risk strategy

  • Build a calendar of the next 12-24 for currency conversion and cross border payment needs

  • Ensure your company is able to meet any legal obligations it enters