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Introduction
As borders have become more fluid, so have the risks to businesses. Volatile foreign exchange (FX) movement poses a growing bottom-line concern for companies that operate in an increasingly globalised and unpredictable environment.
Managing multi-currency cash flow is now essential to most corporations’ global treasury functions – especially for airlines, online travel agencies (OTAs) and e-commerce platforms, whose day-to-day transactions incur costs in multiple markets. Even companies that operate primarily within a single market often carry indirect FX exposure through their global supply chains.
Additionally, in an economy where volatility has “become structural rather than cyclical”, as MillTech CEO Eric Huttman put it, FX transactions carry greater exposure to rate movements between initiation and settlement. As rate swings become more frequent and less predictable, the probability of margin erosion increases.
For companies doing business in these turbulent times, FX risk can be an existential concern – especially as volatility renders the traditional FX playbook no longer fit for purpose.
Overcoming fragmented FX management
A recent Deloitte survey of chief financial officers (CFOs) found that more than one in three respondents rated external uncertainty as “high or very high” – a concern with immediate operational consequences.
Cash flow forecasting loses precision when currency swings move outside modeled scenarios. More long-term efforts like capital expenditure planning and cross-border mergers and acquisitions (M&A) become harder to model with confidence.
These outcomes are difficult to avoid if treasury operations are burdened with legacy infrastructure and a mindset that focuses on managing FX transactions, not FX risk.
Most enterprises have yet to invest in a holistic, enterprise-wide view of currency exposure. Their current business functions operate in silos – each department relying on different data sets and reporting cycles – complicating any attempt to approach FX from a wider perspective.
For instance, procurement might negotiate supplier contracts in a foreign currency, without consulting with treasury about the currency exposure involved. Currency risk is thus created at the contract level before treasury is even consulted.
Their expertise and resources for proactively monitoring currency shifts have also not caught up with today’s more complicated risk environment. For example, companies often still base their FX management processes on static spreadsheets that cannot support dynamic, scenario-based decision-making – only managing the most visible risks that can be easily hedged with financial instruments.
Correspondent banking infrastructure – a critical conduit for FX transactions – is increasingly misaligned with the speed of modern commerce. Banking workflows built for batch processing and multi-day settlement cycles can feel sluggish in an environment where real-time domestic payments are becoming standard.
To compensate, businesses often rely on “prefunding” – maintaining balances in accounts across multiple jurisdictions to reduce execution time for international payments.
While operationally practical, this approach ties up capital that could otherwise be deployed for investment or debt reduction. It also heightens exposure to currency conversion risk and liquidity costs, as funds sit idle in foreign currencies and must be actively managed.
Improving FX management: Start with exposure forecasting
In these volatile times, effectively managing currency risk – and making effective forecasting possible – boils down to understanding where your business’ exposures lie.
Start by removing organisational silos that cloud objective risk assessment. Align your treasury processes more closely with business planning, rather than operating in isolation. By integrating sales forecasts, procurement cycles, capital expenditures, and expansion plans into FX strategy, you can move from reactive hedging toward more structured exposure planning.
Secondly, assess critical operational factors and how they are impacted by currency exposures. Establish a baseline view of the currencies you trade in, the countries you do business with, and the impact that currency fluctuations make on your revenue and costs, specifically in the following areas:
- Profitability and margins: Fluctuations alter the real cost of goods and capital equipment, eating into already thin profit margins.
- Market competitiveness: A rising domestic currency makes exports less competitive, while a falling rate increases the cost of essential foreign inputs.
- Financial obligations: Volatility increases the cost of servicing foreign-denominated debt, and can create liquidity pressures if unsettled funds are needed for immediate obligations.
- Asset valuation: Translation risk affects the reported value of offshore assets and subsidiaries when converted for financial statements.
Take a comprehensive view of how these factors affect your bottom line. Investigating major and minor cost drivers, such as fuel purchases denominated in foreign currencies, can help you zero in where currency risk originates within the organisation.
Use this clearer view of exposure to shape a coherent, enterprise-wide FX risk strategy. Define explicit objectives tied to financial outcomes – such as protecting target margins through a defined exchange rate range, or setting a hedge ratio that shields a specific percentage of forecasted cash flows.
These parameters can help you determine the appropriate hedging approach and execution tools – whether you use forwards, options, or natural hedges embedded in your operating model. The right hedging strategy can help treasury reduce earnings volatility and align FX outcomes with broader business objectives.
Using technology to implement your strategy
Thanks to new developments in finance technology, CFOs and treasurers can use technologies like AI and machine learning to better support their FX strategy.
AI-based platforms allow treasury professionals to analyse large datasets for patterns and insights – improving forecasting accuracy over time and strengthening their position against FX risks in unstable markets. Even forwards, options and other traditional hedging tools are giving way to more flexible, AI-powered FX solutions.
Businesses can use Bettr’s real-time treasury solutions to forecast FX directly within their payment or treasury workflows – locking in rates when stability matters, and taking advantage of competitive market pricing when speed counts.
These FX services are built on Ant International’s proprietary Falcon Time-Series Transformer (TST) AI model: a transformer-based model that learns complex patterns from vast historical data sets.
Using this AI model, Bettr’s FX services provide forecasting support to help businesses significantly improve their cash flow and FX exposure visibility in near-real time. Bettr’s real-time and 24/7 monitoring enables businesses to be more proactive rather than reactive, mitigating costs and volatility as they transact across borders.
Plus, with accurate, to-the-moment forecasting at their fingertips, treasury departments can reduce the need for pre-funding FX settlement – lowering idle liquidity and activating more interest-earning capital as a result.
The Falcon TST AI model uses 8.5 billion parameters, and can be trained on specialised data to address unique exposure patterns of specific sectors. An early client, investment holding company Capital A, trained the Falcon TST AI model on 80 million additional parameters of travel-related data – reducing its need for unnecessary hedging and leading to reductions in overall FX costs by up to 40%.
A proactive approach to FX risk
FX volatility is now a structural feature of the global economy. In this environment, managing transactions alone is not enough: treasury must move beyond execution toward active risk orchestration.
Strategy, not just the speed of reaction, determines whether FX becomes a controllable variable or a recurring earnings shock.
Technology now acts as a force multiplier for that strategy. AI-driven tools such as Bettr’s treasury services enable treasuries to forecast cash flow and currency exposure with a high degree of accuracy – allowing them to adjust as conditions evolve.
In an unpredictable market where even small currency movements can materially affect performance, you may strengthen your competitive advantage by forecasting your own exposures more precisely than your peers. When treasury can accurately forecast risk, capital is deployed with conviction rather than caution – the cornerstone of FX management in today’s unpredictable times.
Contact us to explore Bettr’s Real-Time Treasury Management Solutions.
