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Understanding Currency Risk
Currency risk affects thousands of British businesses every day, impacting your bottom line with changes in exchange rates that place in seconds. By proactively managing currency risk, your business can avoid costly surprises.
An entire industry has sprung up around trying to second-guess where exchange rates will move next. The uncomfortable truth is that while these so-called experts will happily take your money, they have just as little of an idea of where the market will move next as anyone else.
Hedging, diversifying and managing currency risk helps protect cashflow and net margins. Proper planning ensures you’re ready for market fluctuations.
Explore our library of explainers and downloadable guides tools below for more ways to mitigate currency risk and take control of your cash.
How currency risk impacts your business
Currency risk arises when a company’s transactions, assets, or liabilities are denominated in a foreign currency. Fluctuations in currency values can lead to unexpected gains or losses, impacting financial outcomes and profitability.
To effectively manage currency risk, it’s important to identify your company’s exposures and evaluate the potential impact of market volatility. By understanding your risk profile, you can develop strategies that protect your revenue and control costs in unpredictable environments.
Successful currency risk management includes techniques such as hedging with forward contracts, stress-testing outstanding positions and maintaining operational flexibility. Implementing these practices helps you maintain financial stability and seize opportunities in global markets.
Cash is the King · FX Risk Calculator
What could an unhedged position cost you?
Enter your currency exposure and see the amount at risk from adverse exchange rate movements before settlement.
Your position
VaR unavailable until valid daily reference-rate data and a supported exposure range are available.
Lock it in with a forward contract
A forward is an agreement to exchange at the provider's forward rate for settlement in 3 months, with pricing influenced by forward points, fees, and credit/collateral terms. It can reduce spot-rate uncertainty for your payable, while introducing trade-offs such as opportunity cost. Compared with an unhedged position, this model shows current VaR around —.
Speak to an FX specialist
Request a review of your payable/receivable exposure and hedging options with your team.
Rates refresh daily when you use this calculator; weekends and holidays use the latest available reference rate.
This calculator provides a model-based Value at Risk estimate for informational purposes only — not financial advice, a tradable exchange-rate quote, or a guarantee of any outcome. Value at Risk estimates potential loss at a chosen confidence level under model assumptions. A 95% VaR threshold can still be exceeded about 5% of the time, and a 99% threshold about 1% of the time. Historical market behaviour does not guarantee future results. Forward contracts may not be suitable for every business. Please seek independent advice before making hedging decisions.
FREE CURRENCY RISK GUIDE
Overcome uncertainty and protect your bottom line.
Download our exclusive guide for navigating market volatility.