Exchange Rate Risk Management: Strategies and Solutions to Enhance Business Competitiveness

Exchange rate risk management has become one of the most strategic challenges for companies operating in international markets. In a world defined by increasingly frequent currency fluctuations, geopolitical tensions, and new trade dynamics, protecting margins and ensuring business stability has become key to competitiveness.

International expansion offers significant growth opportunities but also exposes companies to financial risks, which, if not properly managed, can significantly impact profitability and investment capacity. 

Therefore, managing exchange rate risk is not merely a protective measure but an integral part of a company’s financial and commercial strategy.

WHAT IS EXCHANGE RATE RISK, AND WHY IS IT CENTRAL FOR BUSINESSES?
 

Exchange rate risk refers to a company’s exposure to fluctuations in exchange rates between different currencies. This risk arises whenever a business receives or makes payments in foreign currency, purchases raw materials priced in currencies other than the euro, or trades with international markets operating in different currencies. 

Exchange rate risk is also linked to changes in the value of assets and liabilities on the balance sheet that are denominated in foreign currencies, due to discrepancies between the rate at initial recognition and the rate at the end of a reporting period (quarterly, semi-annually, or annually).

The effects of exchange rate risk may be less immediately visible than other risk factors, but they are no less significant. An adverse exchange rate movement can erode margins on an already secured contract or cause material deviations from forecasted results, even when production processes and commercial strategies remain unchanged.

In an increasingly volatile global landscape, shaped by monetary policy decisions and fast-changing macroeconomic dynamics, exchange rate risk tends to intensify. Its management, therefore, becomes crucial for ensuring operational continuity, financial stability, and long-term competitiveness.

INTERNATIONAL SCENARIO AND GLOBAL CURRENCY RISKS
 

To understand the importance of exchange rate risk management, consider the current landscape in which companies dealing with foreign counterparts operate. The year 2025 has seen growth in international trade, albeit accompanied by significant uncertainty stemming from geopolitical tensions, stricter trade policies, and heightened financial market volatility. 

According to UNCTAD estimates, global trade is expected to reach a value of approximately USD 35 trillion, marking a 7% increase over the previous year. This expansion is being driven primarily by East Asia, Africa, and South-South trade corridors, which are becoming increasingly central to global exchanges.

However, the overall picture remains fragile. The rise in protectionist policies, such as the average increase of US tariffs to 16%, volatility in emerging markets, and growing uncertainty surrounding major global currencies are contributing to financial and currency market instability. 

WTO forecasts anticipate a slight decline in merchandise trade volumes in 2025, with only partial recovery expected in 2026. The new year has already shown signs of similar tensions and a particularly challenging macroeconomic scenario, reinforcing the need for businesses to adopt increasingly structured risk management strategies. In this environment, currency dynamics are playing an ever more pivotal role in shaping business costs, revenues, and competitiveness.

Italy: resilient exports and growing currency exposure

According to the latest Istat data, Italy continues to hold a leading position in global trade. In 2025, Italian exports grew by 3.9% in the first ten months, outperforming the average of major European manufacturing economies. 

This growth was driven by both EU markets (+4.2%) and non-EU markets (+2.6%), with especially strong performance in the United States (+9.1%) and Switzerland (+14.3%). The trade balance remains positive, confirming the strong international standing of Italian businesses.

According to Intesa Sanpaolo’s Research Department, 2025 has also been marked by high volatility in major exchange rates, particularly EUR/USD and EUR/CHF. The US dollar weakened for much of the year, with volatility spikes coinciding with increased US tariffs and geopolitical crises. 

The Swiss franc, traditionally a safe-haven currency, recorded significant fluctuations, affecting trade flows between Italy and Switzerland. The growth in trade with non-European markets is exposing businesses to greater currency risks, which are increasingly impacting financial performance and underscoring the need for structured and proactive exchange rate risk management.

THE NEEDS OF COMPANIES TRADING INTERNATIONALLY AND FACING EXCHANGE RATE RISK
 

For companies active in international markets, exchange rate risk is not an abstract concern but a tangible factor influencing both operational and strategic decisions. The need to protect margins, preserve the value of foreign currency-denominated assets, plan reliably, and maintain flexibility is shared across all sectors.

Protecting margins and profitability
 

Exchange rate fluctuations can erode margins on already agreed sale or purchase contracts, directly impacting financial results. A common scenario is that of a manufacturing company exporting to the United States and receiving payments in dollars: a depreciation of the US dollar against the euro can significantly reduce margins. 

To avoid such outcomes, companies can fix the exchange rate in advance for future exports. This approach allows for revenue stabilisation and margin protection, regardless of market volatility.

Reliable financial planning and budgeting
 

Cash flow predictability is vital for internationally active businesses, which need to accurately forecast income and expenses to plan investments, manage payments, and monitor actual versus budgeted performance. 

For instance, a multinational with branches in different countries may struggle to assess individual business unit performance due to ongoing currency fluctuations. By setting a budget exchange rate and hedging future flows, a company can ensure consistency between budgets and actuals, facilitating management control and improving the quality of strategic decisions.

Operational flexibility and tailored strategies

Each business has unique characteristics in terms of cash flows, markets, and risk appetite. This creates a growing demand for flexible solutions capable of adapting to recurring or irregular flows and responding promptly to market changes. For example, a company with sales spread between Asia and North America may face unpredictable and inconsistent currency flows. 

Choosing solutions that allow partial hedging while retaining the possibility to benefit from favorable exchange rate movements can be a highly effective approach. In some cases, tools that ensure a minimum level of income help to strike a better balance between protection and opportunity

Simplification and process automation
  

As foreign currency operations increase, so does operational complexity. Companies are seeking tools that allow for simple, fast, and independent management of exchange rate risk, reducing errors and execution times. A relevant case might be a business regularly exporting to multiple non-EU countries and managing dozens of currency operations each month. 

Previously, manual processes and traditional intermediaries often led to delays and error risks, limiting the ability to capitalize on market opportunities. Digital platforms now enable real-time rate monitoring, streamlined transactions, and instant reporting, reducing operational complexity and enhancing decision-making autonomy.
 

Cost and opportunity optimisation
 

Businesses strive to balance protection and cost-effectiveness. The goal is to shield against unfavorable currency movements without incurring high costs while retaining the ability to seize market opportunities where possible. For instance, a company may implement strategies that set a minimum and maximum exchange rate range, limiting risk and hedging costs, and combine this with tools to optimize multi-currency liquidity management. This approach balances protection and flexibility, lowering costs while leveraging opportunities offered by the FX markets.

A growing area of focus involves managing exotic currencies. Companies that can transfer funds to foreign subsidiaries in local currencies gain greater control over conversion costs and reduce exposure to market volatility. 

Paying in local currency helps lower total costs, ensure greater price stability, and improve supply quality, fostering more robust and trust-based relationships with local partners. This strategy offers a competitive edge, particularly over rivals that operate solely in dollars, euros, or other strong currencies.

THE SUPPORT OF INTESA SANPAOLO
 

In a climate of pronounced currency volatility and rising geopolitical uncertainty, Intesa Sanpaolo positions itself as a strategic partner for companies operating in global markets.

Managing exchange rate risk requires specialist skills and deep knowledge of currency markets. For this reason, businesses seek partners that can offer tailored analysis, advisory support, and solutions aligned with their operational and strategic needs. 

With the help of dedicated experts, companies receive personalized analysis of their flows and currency exposures, along with guidance on the most suitable solutions. This approach enables more informed decision-making and safer, more consistent risk management, reinforcing international market presence even in complex environments.

Intesa Sanpaolo’s offering integrates exchange rate risk management solutions, specialist advisory services, and advanced digital tools:

• Through platforms such as Inbiz Forex and Greentrade, businesses can manage currency operations more simply, autonomously, and with traceability, reducing complexity and improving control over financial flows.
• The expanded range of available currencies (around 140 out of over 180 globally traded FX currencies, covering over 99% of traded currencies) enables companies to make international transfers directly in the destination currency via Inbiz, with automatic conversion, offering greater flexibility in cross-border operations.
• Finally, the support of dedicated specialists allows for the development of strategies aligned with business goals and their ongoing adaptation in line with market evolution.

In an ever-evolving global context, managing exchange rate risk can no longer be seen as a purely operational or short-term concern. It is a structural component of corporate strategy, affecting the ability to plan effectively, safeguard profitability, and support long-term growth in international markets. 

Mastering these mechanisms reduces uncertainty, stabilizes financial performance, and strengthens competitive positioning, even in complex and unstable scenarios. For Italian businesses, developing a risk-aware culture and equipping themselves with the right tools, skills, and support is now a strategic choice to turn internationalization into a long-term source of continuity and value.

All published or otherwise available material on the website — including trademarks, logos, domain names, images, videos, press releases, articles, and documents in general reproduced herein, as well as application software, codes, and format scripts used for the site's implementation — is the property of Intesa Sanpaolo, companies of the Intesa Sanpaolo Group, or companies with which Intesa Sanpaolo has entered into commercial agreements and is protected under copyright and trademark regulations. All rights are reserved. Therefore, without prior formal consent from the owner, such material may not be copied, downloaded, reproduced, used on other websites, modified, transferred, distributed, or communicated to third parties, except for personal use only, with any commercial use being strictly prohibited.