It is essential to understand what exchange rate risk is. Exposure to exchange rate risk occurs when currency rate fluctuations can negatively (or positively) impact a company’s revenue, costs, or profit margins. For importers, exchange rate risk exists between the time a product/service is purchased and the time payment is made. For exporters, it is between the sale of a product/service and the receipt of payment. For example, if a European company sells products to the U.S. and the dollar weakens against the euro, revenues generated in dollars will be lower when converted to euros, potentially leading to financial losses. Conversely, if the dollar strengthens, the company could see higher profits upon conversion. These fluctuations are unpredictable and influenced by global macroeconomic factors, increasing the volatility and complexity of currency risk management.
Since currency risk can significantly impact your company’s profitability, Mondial Change offers solutions to protect you. We work with you to implement strategies that neutralize or, at the very least, significantly reduce the impact of exchange rate fluctuations on your operations. As a company, you should view this as a form of insurance. The main idea in hedging currency risk is to lock in an exchange rate for a future transaction, protecting you against potentially unfavorable currency movements. A wide range of strategies can be implemented for this. The most common strategy is setting a forward contract that locks in a rate for settlement. However, there are alternative approaches, each with specific features: some offer guaranteed protection rates, others do not; you can choose protection rates equal to, worse than, or better than the reference forward rate; some guarantee a fixed amount, while others allow a higher amount if the market moves favorably; some allow participation in favorable spot movements, others don’t; finally, some strategies are easier to implement than others. As experts, we are here to support and help you select the best strategy to secure your business.
Since there are several currency hedging strategies, how do you choose the one that best suits your situation? The experts at Mondial Change will guide you. We consider all the decision-making criteria. What is the nature of the currency risk? It may be transaction risk, conversion risk, commercial risk, or economic risk. Identifying the type of risk allows precise measurement of exposure and the most appropriate strategy for hedging. What is the volume of foreign currency flows? Smaller businesses with low flow volumes may prefer balancing income and expenses in the same currency, while larger companies with over €20 million in revenue may use forward contracts or currency options. Are the flows predictable? If the amount and maturity date are known in advance, a forward contract is appropriate. If payment dates are uncertain, a flexible forward may be preferred. Other varied criteria influence the best choice, such as risk tolerance or the internal ability to understand and implement hedging strategies. We support you in this process by offering a wide range of solutions and advising you on the most suitable strategies. With us, you will manage currency risk hedging effectively and with peace of mind, allowing you to focus on your core business.
You can exercise your forward contracts directly online or by contacting our trading desk. You simply need to indicate the account where you want the funds transferred. This may be one of your bank accounts or that of a beneficiary. When a forward contract reaches maturity, you have the option to request an extension. However, we reserve the right to accept or decline the extension. For optional hedges, we can convert spot currency deliveries into open forward contracts to offer maximum flexibility.
Each confirmed hedge triggers a confirmation email containing all the transaction details (amount, exchange rate, countervalue, value date, fixings, barriers…). Before the maturity of forward contracts and before fixings on optional hedges, our trading desk will email or call you as a reminder. At any time, you can access a centralized and unified version of your hedge portfolio, aggregating positions held with one or more of our partners.
The exchange rates offered for your hedges are always communicated before confirming operations. The spreads applied by Mondial Change vary depending on factors such as the client's annual trading volume, the currency pair traded, or the hedging instrument used. These spreads are negotiated between Mondial Change and the client in advance of any validation.
Currency hedges are validated by phone with our trading desk. We are available from 8:30 a.m. to 7:00 p.m. to carry out these operations. Hedging operations on forward contracts require only a simple agreement between you and your advisor on a recorded line. Hedges involving currency options or NDF-type contracts are preceded by a suitability report to ensure the proposed strategy meets your needs. After validation, you receive a confirmation email summarizing all characteristics of the transaction.
You can contact your dedicated advisor at any time to learn about market trends and develop the best strategies to hedge your currency risk. Our status as a Financial Investment Advisor (CIF) registered with ORIAS guarantees the professionalism of our guidance. We take the time to analyze your currency flows with you, allowing us to offer flexible, tailor-made hedging solutions. We aim to support your budget rate goals as closely as possible. Our economist also publishes a weekly report, the ‘Hebdo Devises’, which is sent to you every Monday morning to keep you informed of major currency market trends.
Very often, your banking partner cannot provide 100% of the currency line you need to hedge your risk. In that case, you must turn to other banks or specialized providers to fill the gap. This multiplies contacts and scatters your hedging across different systems. Our partner network generally enables us to meet 100% of your needs. We handle all administrative steps related to opening accounts and lines. Your only contact remains your Mondial Change advisor. Our back office centralizes all your hedging positions across different partners and returns a unified version of your hedge portfolio.
Mondial Change offers the most comprehensive currency risk management service on the market by aggregating the hedging capabilities of several top global payment institutions and investment firms. As a banking operations broker (COBSP) and a financial investment advisor (CIF), we have built strategic and technological partnerships with several specialized entities. By using Mondial Change to manage your currency hedges, you benefit from the combined strengths of our partners while maintaining a single point of contact for your daily operations. We can provide hedging solutions for no fewer than 75 currencies (forwards, options, or NDFs). You can view our global hedging capabilities across all partners, and even get detailed currency-specific insights by clicking on the currency’s ISO code.
Foreign exchange risk management is not simply about protecting against losses; it is also an opportunity to maximize profits. Companies can use financial instruments such as futures contracts, currency options, and currency swaps to actively manage their exposure to foreign exchange risk. By adopting a proactive approach, a company can capitalize on profit opportunities when exchange rates are favorable, while limiting losses during adverse fluctuations. Effective foreign exchange risk management can also enhance a company's competitiveness in international markets. By protecting its profit margins from exchange rate fluctuations, a company can maintain stable prices for its products or services, giving it a competitive advantage. Companies that fail to manage their foreign exchange risk may be forced to adjust their prices unexpectedly, which can make them less competitive in global markets.
Foreign exchange risk management is a critical component of financial management for any company operating internationally. It helps protect profitability, maintain competitiveness, and maximize profit opportunities while minimizing exposure to exchange rate fluctuations. Companies that fail to effectively manage their foreign exchange risk expose themselves to unforeseen variations in their financial results, and excessive exposure to foreign exchange risk can lead to significant financial losses, threatening cash flow and the company's viability. Therefore, it is imperative for any company to implement robust foreign exchange risk management policies and strategies to ensure long-term financial stability.
Our technical team develops the specific solutions you need to manage your foreign exchange risk. This can include integrating data into your internal software for reporting purposes, communicating data on foreign exchange gains and losses, or automating the execution of foreign exchange hedging strategies based on your criteria. Because we are already technologically connected to all our partners, Mondial Change allows you to retrieve all the data related to the hedging operations you carry out with any of our partners. Therefore, you have a significant advantage in using our network of partners rather than relying on providers outside our pool.
To help you secure your international transactions, we offer a wide range of foreign exchange hedging strategies tailored to your company's profile. We can implement the most suitable strategies, from the simplest to the most sophisticated.
For example, we can offer strategies primarily focused on securing the exchange rate, such as a fixed forward, which guarantees a specific rate at a given date and amount, with no surprises. A participative forward, on the other hand, allows you to benefit from positive market movements, albeit with a less favorable hedging rate. These strategies are among the easiest to implement.
If you're looking for a balance between security and opportunity, we encourage you to consider solutions that offer flexible protection based on market conditions. The ratio term offers enhanced protection, but may require purchasing a larger amount if the market fluctuates significantly. The tunnel and tunnel ratio also offer a compromise between protection and participation, within defined limits.
Finally, for companies with advanced market knowledge, we can implement the most sophisticated strategies. These can be deactivating or activating, introducing barriers that condition your company's rights or obligations based on market developments.
Our expertise in these various strategies allows us to offer you foreign exchange risk hedging tailored to each situation, balancing protection, flexibility, and opportunity.