Currency exposure explained for Startups: How to protect your profits when scaling your business overseas

Currency exposure is inevitable when you’re a growing business with either customers or suppliers overseas. But often, currency exchange can seem beyond your control, driven by political forces, market volatility and economic shifts. You may think it’s just part of doing business internationally, but ignoring currency exposure risk can quietly erode your profits.

Whether you’re converting earnings or paying suppliers, fluctuations in exchange rates can have a surprising impact on your bottom line. For entrepreneurs and startups, even small shifts in costs can make a big difference. So how can you stay in control of your finances when exchange rates are always moving?

Key challenges

Currency exposure presents real financial risks for businesses. If you pay international suppliers in USD and the exchange rate shifts against you, your costs may rise unexpectedly. Or your marketplace earnings in foreign currencies could lose value during conversion, especially if rates fluctuate before you transfer them home.

A small movement in exchange rates can make a significant difference – imagine an increase of just 2% on a $50,000 supplier invoice, or reduction in earnings when converting €10,000 into GBP. These changes both impact your profits and complicate forecasting and budgeting.

Simplified solution

Managing currency exposure doesn’t have to be complicated. One simple tool is a multi-currency account, which lets you hold and use funds in different currencies, so you don’t have to convert immediately. Instead, you can wait for a more favourable exchange rate or even pay suppliers in the same currency that you receive from customers, avoiding costly double conversions.

Some multi-currency accounts like the World Account from WorldFirst allow you to set up rate alerts or target an exchange rate, so you don’t have to be watching the market constantly. When the rate hits your target, the money is exchanged automatically – no action needed on your part – letting you focus on running your business.

For longer-term certainty, forward contracts can lock in an exchange rate for future transactions, protecting you from sudden market shifts. If you know you need to make an overseas supplier payment in a few months but are worried about the value of your home currency dropping, you can enter into a forward contract and guarantee a future exchange rate.

Ready to take control of your currency exposure? Connect with L.F. Leon, MBA , to explore how WorldFirst can help you manage exchange rate risks and optimize your global transactions.