Take Control of Your Business Currency Risk

Currency risk, sometimes called FX exposure, is the chance that a move in the exchange rate changes what a cross-border payment costs or earns you. An importer paying suppliers in dollars, an exporter invoicing in euros, a company running overseas payroll, each has money crossing a currency line, and each is exposed to the rate between agreeing a figure and settling it. Managing that risk, or hedging, means reducing how much a rate move can hurt you, so your margins come from your business rather than from the currency market.

We offer two tools for it, and they solve different problems. A forward contract fixes an exchange rate now for a payment due on a future date, so whatever the market does in the meantime, the pound cost of that payment is already set. A target-rate order, also called a limit order, works the other way: you set the rate you want, and the transfer happens automatically if and when the market reaches it, which it might not. One gives you certainty of execution on a date; the other gives you a specific rate, but no guaranteed date and no guarantee it triggers at all. Knowing which you actually need is most of the job, and we'll talk it through with you rather than sell you a product. This isn't financial advice, and how much to hedge is a decision for your business, but we can explain exactly how each tool behaves so you can make that call clearly.

Currency risk isn't one industry's problem, it's anyone whose numbers cross a currency. An importer buying stock from China in dollars, watching the sterling-dollar rate decide whether an order lands on budget. An exporter invoicing European customers in euros, where a stronger pound shrinks what those invoices are worth back home. A business running monthly payroll for a team abroad, wanting the pound cost to stay steady rather than drift. A company with a large one-off coming up, a piece of equipment, an acquisition payment, a property abroad, where a rate move between now and completion could move the cost by a meaningful amount.

If any of your costs or income are set in a foreign currency, you already carry currency risk whether you manage it or not. The pages that sit alongside this one show it in context: paying overseas suppliers, running international payroll, and managing FX for import and export businesses all touch the same underlying exposure from different angles, and they're gathered on our business FX hub. If you run an import or export business, where the risk sits on both sides at once, our guide to managing currency risk on import/export business puts these tools in that context. If your exposure centres on one route, such as euro payments into Europe, our corridor guides like the UK to Italy cover the mechanics of that flow.

A forward contract, for certainty on a date. You agree a rate with us today for an amount you'll need to pay or convert on a set future date, up to a defined period ahead. You usually place a deposit to open it, with the balance due nearer the date. When the date arrives, the transfer goes through at the rate you locked, regardless of where the market has moved. It's the right tool when you know a payment is coming and you need to know its pound cost now, for budgeting, for a quote you've given, or for a contract you've signed.

A target-rate order, for a rate you're waiting on. You tell us the rate you want and how much you want to convert. We monitor the market continuously, and the moment it reaches your rate, even briefly, the transfer executes automatically. The trade-off is that there's no fixed date, and if the market never reaches your rate, the order simply doesn't trigger. It's the right tool when you're flexible on timing but have a specific rate in mind, and you'd rather wait than settle for less.

The distinction in one line: a forward contract guarantees the transfer happens on the agreed date at the agreed rate. A target-rate order guarantees the rate but not the date, and may never execute. If you need to be certain a payment goes through by a deadline, that's a forward contract. If you're chasing a level and can wait, that's a target-rate order. Both pages, forward contracts and target-rate orders, go into the mechanics in full.