How do you manage currency risk in exports?
You took an order; payment comes in three months. If exchange rates move meanwhile, a fixed-price sale’s profit can shrink, or if costs are in foreign currency, the maths can change entirely. 💱
Currency risk is a risk exporters can’t control but can manage.
Short answer: currency risk is measured, priced in and hedged where needed. First see the open exposure, then consider a price margin and your bank’s hedging tools. 🛡️ Note: this is general information; discuss financial instruments with your bank and accountant.
Note: foreign trade regulations, procedures and support schemes change; get current information from your customs broker, your bank and the Ministry of Trade.
Four sources of currency risk
BU BÖLÜMÜN ÖZETİ
- Between quote and order
- Production time
- Credit receivables
- Foreign-currency costs
Where does it arise? 🔍
Between quote and order
One rate when quoting, another when ordering. 📄
Production time
Between raw-material purchase and shipment; costs shift. 🏭
Credit receivables
Between shipment and payment; the receivable waits in foreign currency. ⏳
Foreign-currency costs
With imported inputs, income and costs may be in different currencies. 🔀
Seeing the risk
BU BÖLÜMÜN ÖZETİ
- Open exposure list
- Maturity calendar
- Natural hedge
- Sensitivity
Four steps. 📊
Open exposure list
Pending foreign-currency receivables and payables; one table. 📋
Maturity calendar
Which amount is collected or paid on which date? 📅
Natural hedge
The part where foreign income and costs overlap. ⚖️
Sensitivity
If rates move by a given amount, what happens to profit? A simple scenario. 🧮
Ways to manage
BU BÖLÜMÜN ÖZETİ
- A risk margin in price
- Short validity
- Advance and partial advance
- Bank hedging tools
Four options. 🛠️
A risk margin in price
A reasonable currency margin in quotes; see the export quote guide. 🏷️
Short validity
Keep quote periods short; no orders at old rates. 📅
Advance and partial advance
Shorter terms mean shorter risk; see the payment guide. 💵
Bank hedging tools
Products like forward contracts; suitability assessed with bank and accountant. 🏦
Setting rules
BU BÖLÜMÜN ÖZETİ
- A written currency policy
- No speculation
- An owner
- Monthly review
Four principles. 📜
A written currency policy
What to do in which case, written in advance. 📝
No speculation
Betting on rate forecasts isn’t an exporter’s job. 🎲
An owner
One person tracks open exposure. 👤
Monthly review
Open exposure and the maturity calendar reviewed monthly. 🗓️
Four common mistakes
BU BÖLÜMÜN ÖZETİ
- Ignoring currency
- Waiting on forecasts
- Long quote validity
- Using tools you don’t understand
All four can erode profit. 🚧
Ignoring currency
Long fixed prices leave profit blind. 🙈
Waiting on forecasts
Holding currency because “it will rise” is gambling. 🎰
Long quote validity
Quotes valid for months bind you to old rates. 🕰️
Using tools you don’t understand
A poorly understood financial product creates new risk. ⚠️
What should I do today?
BU BÖLÜMÜN ÖZETİ
- Step 1: list open exposure
- Step 2: a simple scenario
- Step 3: talk to your bank
- If you want help
Three steps, one hour. 🪜
Step 1: list open exposure
Foreign receivables and payables with amounts and dates; a table. 📋
Step 2: a simple scenario
If rates move by a given amount, what happens to profit? Two lines. 🧮
Step 3: talk to your bank
The trade desk, to understand hedging options. 🏦
If you want help
Let us set up your currency risk routine together: use the consult your expert form. For your current setup see the digital audit; the bigger picture sits on the foreign trade consultancy page. 🎯
Related reading from the archive: tracking receivables · raising prices.
📝 Notes From the Field
An exporter signed a long fixed-price agreement; by payment day, exchange rates and raw-material costs had moved and profit was close to zero. An open exposure table and maturity calendar were set up, quote validity was shortened, a risk margin was added to prices and hedging options were reviewed with the bank. In the following period the profit margin became more predictable.
📖 Short Glossary
Currency risk: the risk that exchange rate changes affect income and costs. Open exposure: an unhedged foreign-currency receivable or payable. Natural hedge: income and costs in the same currency offsetting each other. Forward contract: a tool fixing a future exchange rate.
⚡ Quick Summary
Currency risk is manageable. 💱 It arises between quote and order, during production, in credit receivables and from foreign-currency costs. An open exposure list, maturity calendar, natural hedge and simple scenario make it visible. A risk margin, short validity, advance payment and bank tools manage it. Write a policy; don’t speculate.
🎯 Next Step
Let us set up your currency routine: use the consult your expert form. Samples sit in the samples guide; for your setup see the digital audit.
Frequently Asked Questions
Sık Sorulan Sorular
First see the risk and manage it through price and terms. Financial hedging is considered with the bank as amounts and terms grow.
Clauses updating price beyond a certain rate change are used in some sectors. Discuss openly with the buyer and put it in the contract.
Selling in the currency of your costs creates a natural hedge. The choice also depends on buyer acceptance.