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Hedging FX risks
Companies with income, expenses, liabilities or assets in a foreign currency are exposed to fluctuations in foreign exchange rates. FX fluctuations may cause significant variation in earnings, cash flows and the balance sheet, but there are many solutions to hedging against such fluctuations.
Manage your FX risks
FX risk is often the number one financing risk of a company engaged in foreign trade. FX movements may erode the margin in foreign trade and affect the company's earnings and key ratios negatively. You can, however, hedge FX risks in various ways.
- FX movements are often large and unpredictable.
- FX movements may affect the company's earnings negatively.
- You can hedge FX risks in various ways.
FX hedging products are suitable for hedging cash flows that are based on specific transactions or that are otherwise foreseeable. FX hedges are used to reduce the risks related to foreign currency loans, investments and assets. Nordea’s experts assist companies in managing their FX risks and selecting suitable hedging products.
Examples of situations involving FX risks
- The company has income in a foreign currency.
- The company has bought a piece of machinery abroad, for example, from the United States, and payment falls due in US dollars in three months.
- The company has a subsidiary outside the euro zone.
Don’t jump into the unknown – identify and manage the risks.
A risk policy is a tool for setting targets and practices for market risk management.