Net FX Exposure Before Hedging

Calculate the net EUR exposure before deciding how much to hedge. Net exposure = foreign-currency inflows - foreign-currency outflows in the same relevant timing bucket The common trap is hedging gross revenue and accidentally creating a derivative position larger than the true economic exposure. List Gross Inflows Expected EUR customer receipts total EUR 3.2M in the quarter. Start with the gross inflow because that is the exposure leadership usually notices first. List Natural Outflows EUR supplier payments are EUR 1.1M, and intercompany royalties are EUR 300,000. Outflows in the same currency and timing bucket naturally reduce the amount at risk.…

Sign up free — one personalized lesson every day, matched to your role and goals.

Already have an account? Sign in