By Millbank FX

Almost every business with international exposure faces at least some degree of currency risk, whether they like it or not. But does every business really need a formal FX risk management strategy? It depends, what type of business are you?

Deal-by-Deal Pricing

In one corner, we have the back-to-back businesses: commodity traders, electronics wholesalers, and many FMCG companies. For these firms, life moves fast—so fast, in fact, that exchange rates are just another detail on the way to closing the next sale. They set prices on a deal-by-deal basis, it’s less about formal FX strategies and more about pricing reactively and keeping cash flowing in the here and now. Speed of execution and timely payments are a priority over full risk management. 

Project-Based Businesses: Hedging for Certainty

On the other side of the spectrum, we find project-driven businesses—engineering firms, construction companies, and anyone else who likes a detailed project plan with costs neatly spelled out. For them, FX risk is no joke. These businesses often work on fixed timelines and budgets, and one adverse currency movement can make or break their margins. They’re not about to leave a multi-year project to the whims of the currency market. Project-based companies tend to use forward contracts to lock in exchange rates at the outset, creating cost certainty for the entire project duration.

Cash Flow Forecasting Businesses: Planning for the Long Term

Then there are companies that operate with long-term cash flow projections—think retailers, manufacturers, and any business trying to budget across fiscal quarters or years. For these firms, FX exposure isn’t a one-time risk; it’s a recurring line item. Left unhedged, currency volatility could turn careful budgeting into a high stakes guessing game. Businesses in this category typically hedge over multiple periods, using a mix of forward contracts, options, and sometimes swaps to stabilise costs. FX management is all about protecting long-term profitability and ensuring predictable costs.

In Summary: Does Every Business Need FX Risk Management?

Let’s be honest, no. Not all businesses require a rigorous FX strategy, but for many, having some level of FX management can mean the difference between controlled costs and reactive scrambling. Back-to-back companies may price reactively, project-based firms hedge for certainty, and long-term cash flow forecasters aim for stability. 

Whether you’re aiming for reactive flexibility or long-term cost stability, a tailored FX management approach can keep you focused on growth while protecting against the unexpected. And if you’re not sure where you fall on the FX spectrum, Millbank FX’s expertise can help you find the right balance—so that currency fluctuations work with you, not against you.

Learn more at Millbank FX.