FX Risk Management

Currency market fluctuations can result in significant, adverse consequences for businesses, sometimes meaning the difference between making a profit or a loss.

We'll help you to quantify your risk, formulate an effective strategy, and execute your trades in a cost-efficient way

What is Currency Risk?

Also known as exchange rate or foreign exchange (FX) risk, it's the risk that exchange rate fluctuations can affect a firm's future cash flows and profitability.

Any company or organisation operating internationally, whether through the supply chain, global sales, or investments, is likely to be exposed to currency risk.

If unmitigated, the impact of FX risk can be disastrous to a business's financial health and future prospects. Currency markets can be highly volatile, making it essential to effectively manage currency risk.

GBPUSD 2000-2020

Can you afford to take the risk?

Large corporates tend to be better prepared than SMEs, but effective currency risk management doesn't need to be complex or difficult to manage
  • 72% of SMEs
    Incur losses due to currency fluctuations
  • 57% of CFOs
    Report lower earnings due to unhedged FX risk
  • 90% of Large Firms
    Have a formal FX Policy

Book your Free FX Audit

Our team of experts will quantify your risk and tailor a currency strategy to your business

Types of Currency Exposure

Currency exposure can arise in all areas of a company's operations, and it's not always easy to spot

Transaction Risk

Arises from transactions taking place in foreign currency. It impacts cash flow and the operating margin, and typically occurs due to the time difference between an order and receipt of funds but can also arise during the pricing or negotiation stage of a deal or project.

For example, a UK firm importing from China could face reduced margins if the pound falls vs the dollar or Chinese yuan.

Economic Risk

Describes the risk to a company's market value caused by exchange rate changes. Such currency movements can impact a company's competitiveness, future cash flows, and value, affecting long-term decisions such as where to invest or markets to enter or exit.

For example, a UK firm exporting to Ireland may be less competitive if the pound gains vs the euro as they will be comparatively expensive.

Translation Risk

Also known as accounting exposure, this is the risk that assets or liabilities change in value due to exchange rate changes. It typically arises when translating the financial statements of a foreign operation when its functional currency differs from that of the parent company.

For example, a UK firm with a French subsidiary which consolidates to GBP could report lower earnings if the pound gains vs the euro.

Managing Currency Risk

Look for opportunities to internally manage the risk before placing FX trades

1. Shift the risk to the other party by only transacting in your own currency

2. Match and offset the exposure e.g. foreign currency sales to offset costs

3. Net group exposures e.g. income from a subsidiary nets with the parent's costs

Download your free guide to Managing Currency Risk

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Oku Markets Currency Risk Guide

Hedging Instruments

If you can't shift, match, or net the exposures then you may need to use financial instruments to hedge your risk.

Oku Markets offers the full range of FX instruments. Here's a quick introduction to the most common trade types.

  • Spot Contract

    For immediate settlement

    The rate is agreed at the point of execution and delivery of funds is made straight away, with most currencies available to settle on the same day

    Spot contracts are used to make payments or to exchange currencies at the prevailing spot exchange rate

  • Forward Contract

    For future settlement

    The rate is agreed at the point of execution but delivery of funds is scheduled for a future date or within a date range

    Forward contracts allow businesses to secure exchange rates as a means of protecting from adverse currency movements

    Learn More

  • FX Swap

    The simultaneous purchase and sale of one currency for another across two different dates

    FX Swaps are used to manage cash imbalances between dates

    For example, if there is a time gap between a foreign currency payment and a receipt, a Swap can be used to fund the payment ahead of the receipt

FX Orders

Protect against short-term downside risk or use market volatility to your advantage by targeting a more favourable rate. We monitor orders 24 hours a day and we'll alert you once the rate is triggered
  • Take profit order

    Take Profit Order

    Set a trigger level better than the current spot rate. Should the level be achievable, we'll book the trade immediately and alert you. You can then choose to take delivery of the funds or roll the position into a forward contract.
  • Stop loss order

    Stop Loss Order

    Set a trigger level at a worse rate than the current spot rate to prevent greater losses. Care should be taken with Stop Loss orders, but we'll guide you through the process.
  • OCO order

    One Cancels Other (OCO) Order

    Set both a Take Profit and Stop Loss order at the same time. As either level triggers, the other is cancelled.

Hedging Programmes

Deciding the amount to hedge and over what timeframe depends on the visibility, certainty, and sensitivity of your future-dated currency exposures
  • Static
  • Rolling
  • Layered

Benefits of Risk Management

  • Profits

    Protect profits from the effects of adverse current fluctuations

  • Cash

    Bring predictability and certainty to future cash flows

  • Growth

    Safely expand into new markets with a robust risk strategy

  • Forecast

    Achieve your budget and goals, and identify funding gaps

Trade with Confidence

  • Dedicated & Expert
    A qualified and experienced account manager will guide you through every step
  • Safe & Secure
    Funds are safeguarded by our FCA-regulated e-money partners at banks and credit institutions
  • Fair & Fixed Price
    All exchanges are made at fixed and transparent pricing, with no hidden fees

How it Works

Let's get to know each other!

We'll crunch the numbers and do the heavy lifting so you can run your business with an effective currency programme to minimise risk and maximise opportunities

  • Set Goals & Identify Risks

    Your qualified account manager will work with you to uncover the sources of FX risk in your business and the potential impact on your goals

  • Quantify Risk

    Our analysts will measure your currency risk and provide statistical analysis to help you understand your risk level and make better decisions

  • Create your Currency Strategy

    Work with our expert FX strategists to develop an effective currency programme that's fully tailored to your unique circumstances and objectives

  • Execute & Manage

    Our experienced FX dealers will execute your plan, provide regular performance reports, and make any adjustments over time. You can also book trades online!

Meet the Trading Platform

The Oku Markets platform is a powerful trading, cash management, and international payments hub

Online, obviously

Online FX in 130+ currencies. Payments, currency wallet management, and user authority levels all under your control

Safe & Secure

Two-factor authentication security, instant email confirmations, and client funds are safeguarded by our FCA-regulated e-money partners at banks and credit institutions

Book a Platform Demo

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Our Approach

Every business is different, our decades of experience and qualifications in markets and risk management, we'll find the right solution for your business.

There isn't a one-size-fits-all approach for currency management, but we've developed a framework that produces consistent and reliable results.

We're proud to work with our clients toward the same goals, and this is demonstrated in our fixed and transparent pricing model and our commitment to educating and empowering our clients to make better decisions.

Screenshot 2022 01 13 at 22.51.35

How can we help you?

Call us on 0203 838 0250 or complete the form and we'll contact you
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Find out more

Thank You!

We'll be in touch shortly with your quote

Book your FX Audit

Contact us to arrange your FREE currency health check

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