Currency volatility: well prepared for uncertain times.

Currency fluctuations: Are you prepared?

According to the latest SME export sentiment survey, the strong Swiss franc tops the list of concerns for Switzerland's export industry — ahead of tariffs and geopolitical risks. For Swiss companies operating internationally, the primary risk lies in sudden exchange rate swings, or a rapid appreciation of the franc. This can result in significant losses and a serious erosion of price competitiveness in foreign markets. With a profit margin of 15% on an international contract, a shift of just a few percentage points in the exchange rate is enough to turn a profitable deal into a break-even — or worse. Past crises have shown that such sudden moves are possible at any time, driven by heightened geopolitical uncertainty and the franc's status as a safe haven. Those who are not prepared are flying blind when negotiating their next major contract.

How can you prepare? An overview of the instruments

Forward exchange contracts are the most widely used instrument. The exchange rate is locked in at the time the contract is signed, regardless of how the rate moves between then and the actual payment date. For a contract with a clearly defined payment date, this is the simplest and most cost-effective form of hedging.

Currency options come at a premium, but offer flexibility: they protect against adverse exchange rate movements while still allowing you to benefit from favourable ones. For companies with uncertain payment dates, or where a bid is still pending and the contract is not yet confirmed, options are often a better fit than a rigid forward contract.

Currency swaps and foreign currency loans are suited to situations where revenues and liabilities run in different currencies over extended periods, for example, capital goods with multi-year payment schedules.

Beyond the classic financial instruments, so-called natural hedging is well worth considering. By matching revenues and costs in the same foreign currency (for instance, sourcing inputs and components from the same currency area in which sales are made) a company can reduce its net exposure without using any financial instrument at all. Invoicing in Swiss francs, thereby transferring the currency risk to the customer, is another option.

One further point that is often underestimated: payment terms are a lever in their own right. Negotiating shorter payment terms in contracts automatically reduces the window during which an order sits exposed to exchange rate risk. This costs nothing in bank fees and can be built into any contract negotiation, regardless of whether a financial instrument is also used.

Natural hedging – a cost-free alternative

Often overlooked, but genuinely effective: natural hedging reduces net exposure without any financial instrument or premium. Here is a summary of the key measures:

Invoicing in Swiss francs: The currency risk is transferred entirely to the foreign buyer. This is straightforward to implement, but may weigh on competitiveness in price-sensitive markets, as foreign customers will typically expect some form of compensation for taking on that risk.

Multi-currency pricing: Export prices are set in local currencies with sufficient margin to absorb a portion of exchange rate movements. This requires flexible pricing models and regular review and adjustment of price lists.

Diversification of export markets: Spreading revenues across multiple currency areas (USD, EUR, GBP, JPY, etc.) significantly reduces concentration risk in any single currency. Losses in one currency area can be offset by gains in another.

Foreign currency accounts: Export revenues are held in the transaction currency and used directly to cover costs in that same currency. This defers the need for conversion and creates flexibility in timing the exchange.

In short: aligning revenues and expenses in the same currency (for example, applying EUR customer receipts directly against EUR supplier invoices), invoicing customers in their local currency while maintaining a foreign currency account, and concluding supplier contracts in the export currency wherever possible: these are the most effective tools of natural hedging. All without financial instruments, all without premiums.

Clear action steps in an acute crisis

When the exchange rate moves sharply in a short space of time, speed matters. Three steps, in the order that counts:

First: quantify your exposure. How much revenue, how many outstanding receivables and payables are denominated in which foreign currency, and when do they fall due? Without this picture, every hedging decision is guesswork.

Second: prioritise existing open positions. Contracts with fixed selling prices and long payment terms are the most pressing to hedge, as they carry the greatest unprotected risk.

Third: speak to your bank before a deal closes, not after. Banks can typically arrange forward contracts and options at short notice. However, the terms will be better if you come with a clear exposure overview rather than in a state of acute urgency.

Where Swiss exporters can find support

The Swiss Bankers Association (SBA), the industry body representing virtually all banks in Switzerland, works with S-GE in the area of export promotion.

In addition, the Swiss Export Risk Insurance (SERV) covers political and economic country risks and ensures that export transactions can generally be completed. This reduces uncertainty around payment settlement, but does not replace currency hedging.

The bottom line

Currency volatility cannot be negotiated away — but it can be managed. The difference between a company that weathers a franc appreciation painfully but intact, and one that loses a large part of its margin in the process, rarely comes down to the exchange rate itself. It comes down to whether a hedging strategy was in place before the crisis hit, or was only put together once it was already under way.