Glosario

A significant step-change in pricing that occurs when businesses pass on the accumulated impact of sharp foreign exchange movements to their customers at the beginning of a new campaign period. This phenomenon represents the acceptance by clients of price adjustments that reflect currency market changes that occurred during the previous period, essentially creating a pricing discontinuity or "cliff" between periods.

The FX ‘cliff’ plays a major role in both FX-driven firms and non FX-driven firms. In the first case, firms that use an FX rate in pricing while facing a competitive landscape may need to keep prices as steady as possible, for example, a South Korean exporter of commodity-type chemicals. In the second case, companies that desire to display the same prices to their customers for commercial reasons, period after period, for example, Netflix who has recently announced a layered FX hedging program.

This term denotes the impact of currency fluctuations on profit margins. The principal aim of layered FX hedging programs is to achieve a smooth hedge rate to mitigate the impact of ‘cliff’-related episodes.

A foreign exchange gain or loss (also written as FX gain or loss) is the financial impact that arises when a transaction is recorded at one exchange rate and subsequently settled or reported at a different rate.

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For any company that invoices customers or pays suppliers in a foreign currency, exchange rates rarely stay still between the moment a transaction is booked and the moment it is settled. That gap — days, weeks, or even months — is where FX gains and losses are born. If the rate moves in your favour, you record an FX gain. If it moves against you, you record an FX loss. Either way, the outcome is outside your control unless you actively manage it.

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Unrealised vs Realised FX Gains and Losses

FX gains and losses fall into two categories that matter both operationally and for financial reporting:

• Unrealised FX gain or loss — arises when open foreign currency transactions (invoices not yet paid or received) are revalued at the exchange rate prevailing on the balance sheet date. The gain or loss exists on paper but has not yet been settled in cash.
• Realised FX gain or loss — arises at the point of settlement, when the invoice is actually paid and the exchange rate at settlement differs from the rate at which the transaction was originally recorded. At this point, the gain or loss moves from unrealised to realised and flows through the profit and loss account.

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Why FX Gains and Losses Matter to Finance Teams

Even a company with healthy commercial margins can see its profitability eroded by unmanaged FX exposure. For mid-to-large businesses operating across multiple currencies, the cumulative effect of exchange rate movements on accounts payable and receivable can be significant — and unpredictable. This volatility makes forecasting harder, complicates budget-setting, and introduces noise into financial statements that makes it harder to assess true operating performance.

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Finance teams often distinguish between transaction exposure (the risk on individual invoices) and translation exposure (the broader effect of revaluing foreign currency assets and liabilities at period end). Both feed into the FX gain and loss line on the income statement.

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How Businesses Reduce FX Gains and Losses

The most direct way to limit FX gains and losses is through hedging — using forward contracts or other financial instruments to lock in an exchange rate for a known future transaction. However, managing hedges manually across dozens or hundreds of transactions is operationally intensive and prone to error.

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Currency Management Automation removes that burden by automatically linking FX hedges to individual trades as soon as they are priced or invoiced, ensuring that exposure is covered at the transaction level before it can become a problem. This approach — known as micro-hedging — is particularly effective at minimising the FX gain and loss line by reducing the time between when an exposure arises and when it is hedged.

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• See how businesses use micro-hedging to reduce FX gains and losses‍
• Explore Kantox Dynamic Hedging® to see how automated hedging works in practice

The FX Global Code of Conduct is a set of global principles of good practice in the foreign exchange market, developed to provide a common set of guidelines to promote the integrity and effective functioning of the wholesale foreign exchange market. It is intended to promote a robust, fair, liquid, open, and appropriately transparent market. The FX Global Code of Conduct was put together as a joint effort by central banks (the so-called Foreign Exchange Working Group or FXWG) and the private sector side (the so-called Market Participants Group or MPG. The FX Global Code of Conduct does not impose legal or regulatory obligations on market participants, nor does it substitute for regulation. Signatories, however, are expected to abide by its informal set of recommendations in the following areas: ethics, governance, execution, information sharing, risk management and compliance and confirmation and settlement process.

FX market participants are the main players in the world of global foreign exchange. They can be classified into three broad categories: liquidity providers, end-users and governments. Helped by brokers and dealers with whom they have close relationships, international banks are the key liquidity providers. They facilitate end-users’ access to liquidity. The most important end-users are corporations, hedgers and speculators. Corporations use FX markets to settle foreign-currency denominated transactions and to hedge the corresponding currency risk, mainly with forward contracts. Speculators include FX- and macro-oriented hedge funds, asset managers and retail investors. Governments are active in FX markets mainly with the activities of central banks. Central banks are the issuers of individual currencies; they can affect currency rates by intervening directly in FX markets or —as happens much more frequently— by altering liquidity conditions through monetary policy tools to act on short-term interest rates.

The deliberate difference or margin applied between the spot foreign exchange rate at the time of budget creation and the actual rate used for pricing during the campaign period.

For example, if a EUR-based company purchases inputs in PLN and the spot EUR-PLN rate is 4.3113 at budget creation, using a budget rate of 4.1820 for pricing represents a 3% markup. This markup serves as a buffer against adverse currency movements and helps maintain profitability.

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FX policy guidelines are a set of procedures that spell out a firm’s methodology and tools in terms of managing currency risk. Drawn by the finance team, FX policy guidelines are based on the business specifics of each company, including its pricing parameters, the location of its competitors, the weight of FX in the business, and the situation in terms of forward points. FX policy guidelines should be clearly communicated across the enterprise, in as much detail as possible. This is especially true in the case of firms with high ‘FX sensitivity’, i.e. firms with low profit margins and/or a high weight of foreign currencies in their business. In such firms, FX-related matters are of strategic importance. Therefore, FX policy guidelines should be clearly communicated and explained by the finance team to all relevant stakeholders within the enterprise. They should be well understood and assimilated by top-level managers, including the CEO and the Board.

A company’s FX policy mandate is the document that sets out: (a) management’s strategic objectives in terms of currency management; (b) the goals of the firm’s FX hedging program. Given the FX policy mandate, the finance team spells out the practical steps needed to execute the firm’s hedging program. For example, a firm in the industrial machinery space that expands into emerging markets can include, in its FX policy mandate, the instruction to price in local currencies, and the goal of hedging the corresponding FX risk in a way that creates savings in terms of the cost of carry.

An FX Policy Template is a document that sets out a firm’s strategic objectives in terms of currency management, as well as the goals of its hedging program or combination of programs. The FX Policy Template also enumerates the resources allocated to the finance team in order to execute FX hedging. In firms that automate part or most of their FX hedging, the FX Policy Template should provide a detailed ‘FX Workflow’ framework, a step-by-step description of the procedures involved in the pre-trade, trade and post-trade phases of the FX hedging execution.

Una ganancia/pérdida cambiaria es el cambio en el valor de una transacción denominada en divisas tal como se refleja en la cuenta de resultados. Una transacción de venta genera una ganancia (o pérdida) cambiaria cuando la moneda extranjera se aprecia (o se deprecia) frente a la moneda local de la empresa.

Si esta posición se cubre con un instrumento financiero, como un contrato de divisas a plazo, este contrato generará pérdidas y ganancias cambiarias compensatorias. Se dice que una ganancia/pérdida cambiaria no se ha realizado cuando se refleja en los estados financieros cuando la transacción aún no se ha liquidado. Cuando se liquida la transacción, se materializa la ganancia o pérdida cambiaria.

El objetivo final del equipo financiero es maximizar el valor de la empresa. Una forma de aumentar el valor de la empresa mediante la gestión de divisas es reducir las ganancias y pérdidas cambiarias de los estados financieros. Independiente cobertura del balance los programas que suelen utilizar las empresas son importantes para gestionar los riesgos cambiarios y minimizar el impacto contable de las ganancias y pérdidas.

La gestión de divisas es el concepto que define los procesos establecidos por las empresas con proyección internacional para limitar su exposición a las variaciones del tipo de cambio y maximizar así el rendimiento de sus operaciones en mercados extranjeros.

¿En qué consiste la gestión de las divisas?

La importancia de la gestión de las divisas para una empresa es proporcional a su volumen de negocio en divisas distintas de su moneda funcional. Las empresas con una presencia importante en mercados extranjeros o con una cadena de suministro global tienden a establecer estrategias de gestión de las divisas en las que participan a todos los equipos de la organización.

Una estrategia eficaz de gestión de las divisas requiere definir de forma precisa las necesidades de divisas y los objetivos estratégicos, así como un conocimiento sólido de las dinámicas que afectan al mercado de divisas. Una vez definidos estos aspectos, la compañía debe establecer las líneas de la estrategia y las herramientas que les ayuden a minimizar el impacto de las evoluciones del mercado sobre los beneficios de la empresa.

Entre las herramientas más comunes para gestionar la cobertura del riesgo de divisas, nos encontramos las alertas de divisas, órdenes de mercado, seguros de cambio, opciones o contratos de futuros. Hay una amplia variedad de productos financieros que responden a esta necesidad, con diferentes grados de complejidad.

Más allá de todos estos productos, las empresas con un volumen significativo de operaciones en divisas, con calendarios de pagos complejos o con modelos de negocio que dificultan las previsiones no tienen la capacidad llevar a cabo todas sus operaciones de manera manual. En estos casos, las soluciones tecnológicas, como dynamic hedging les permiten automatizar la gestión del riesgo y proteger sus márgenes con un esfuerzo mínimo.