Introduction
As we enter the final quarter of 2025, currency volatility remains elevated and global macro risks continue to challenge corporate planning.
SME boards and finance directors are increasingly realising that forex risk is no longer the concern of large multinationals alone. Even larger SMEs and mid‑market firms are feeling the impact.
In a global marketplace, hedging your currency risk should no longer be seen as a ‘nice to have’ but rather as an essential strategy for protecting your business’s bottom line.
Now, more than ever, in house and portfolio finance directors must proactively manage treasury exposures to safeguard cash flow, budgets, and operational plans.
Optimal Currency offers expert-led Treasury Management solutions tailored for SMEs, bringing corporate-level treasury services without the complexity or cost of in-house teams.
1. Treasury challenges for SMEs
Currency shocks and volatility
According to recent corporate treasury analysis, 81% of large corporates across Europe and North America now actively hedge FX risk; and among UK corporates, 68% of those not yet hedging are now planning to do so. Meanwhile, unexpected swings in rates and interest rate differentials have increased both exposure and hedging costs according to Alix Partners.
Margin pressure and forecasting uncertainty
For SMEs trading across multiple regions in multiple currencies, budget planning becomes unreliable when revenue or costs are exposed to FX fluctuations. Small rate movements, even fractions of a percent, can aggregate into tens of thousands of pounds in margin erosion across recurring transactions.
Fragmented Treasury Execution
Many finance teams still rely on spreadsheet-based treasury systems, multiple banking relationships, and inconsistent hedging practices. This fragmentation hinders transparency, audit compliance, and timely decision-making under pressure. This approach can compound losses each month.
2. A strategic treasury framework for enhanced financial control
To meet the challenges of consistent treasury management head-on, finance directors should view treasury as an integrated capability rather than a transactional function. As a strategic partner Optimal Currency’s treasury management service includes:
Risk mapping & diagnostic review
We begin with analysis of your full FX exposure across spot contracts, forward contracts, supplier payments and incoming revenues over the previous 12 months. Understanding your exposure, in terms of numbers of transactions, volume, timing and seasonality is essential before developing a tailored hedging strategy.
Planning and policy design
Once we know what your exposure is we can then compare your previous trading pattern to similar risk management policies over that period to see what good would have looked like previously. Past performance is of course no guarantee of future results, but it is the starting point of understanding how to manage your risk moving forward. Together we then define your risk appetite, hedge ratios, eligible transaction types, and time horizons to create an FX Risk Management policy that is aligned to your board-level governance and audit standards.
Hedging instruments: forward and spot contract ratio, forward time frames and market orders
One of the fundamental elements of your Risk Management Policy will be deciding the ratio of forward contracts to spot contracts in your trade mix. The forward contracts give you the budget certainty of a fixed price over a given time frame, while the spot contracts ensure you benefit from any improvements in the market over that same period. The small premium paid to lock in forward contract rates over a longer period is usually less important to risk-averse FD’s who prefer the security of a fixed rate.
For many companies, the negative impact of an offside currency movement can severely squeeze margin. One of the trading tools we can deploy to help you maximise the rate whilst securing your Spot and Forward contracts are market orders, often called limits and stops.
Limit orders or stop-loss orders offer flexibility with predefined execution points, giving you the opportunity to strike a contract at a better rate if the market moves up (limit) whilst giving you a line in the sand or lower limit to catch the market if it begins to drop (stop loss). We normally work market orders for clients on a short period of time, – usually 24 to 48 business hours in order to maintain the integrity of the overall risk management policy and not chase market movement.
Cash Flow forecasting & monthly cadence
Every treasurer seeks stability, by understanding cash flow needs well in advance and monitoring forecast variances. Regular reviews with our Currency Brokers maintain alignment between exposure and hedging.
Transparent reporting and margin visibility
At Optimal Currency we are not tied to any banks, so can provide upfront visibility on margins and spread, empowering finance leaders to substantiate cost structures and benchmark performance for board-level review.
3. Trends in Treasury Management
Elevated FX Hedging Activity
According to the Global Treasurer, treasury practitioners are adapting to increased cost by extending hedging periods and raising hedge ratios. UK corporates now average 45% hedge coverage over 5.5-month terms reflecting a coordinated and more strategic risk‑management posture across industries
Rising hedging costs and liquidity pressure
Bid-ask spreads are widening, options’ premiums are higher, and liquidity can intermittently evaporate during volatility spikes. This has pushed organisations to reassess their s trategies putting higher scrutiny on execution costs.
Macro drivers of currency risk
The weakness recently of Sterling following global developments that have comparatively strengthened the US dollar including new US-EU and US‑Japan trade agreements have diminished tariff risk premiums and reshaped exchange rate expectations. As markets await further Bank of England signals and UK policy updates, FX volatility remains structurally elevated.
Regulatory and reporting pressures
UK and U.S. regulators continue to strengthen expectations around governance, transparency, and consumer duty. While those rules primarily focus on end clients, finance directors must ensure their treasury and FX functions meet professional documentation and suitability standards.
4. Why partner with Optimal Currency for your Treasury Management
Corporate-level expertise scaled for SMEs
Optimal Currency delivers the treasury know-how of a corporate banking partner but focused specifically on the needs of mid-market UK SMEs. Our advisory includes policy development, tools selection, execution support, and governance oversight.
Transparent pricing and margin disclosure
Every quote from Optimal Currency includes your rate, broker margin, and benchmark bank rate, helping support Consumer Duty compliance and client accountability. This enables finance directors to audit FX fees and justify costs to internal and external stakeholders.
Flexible execution tools
We offer a range of execution tools, including forward contracts, limit orders, and named multi-currency accounts, with oversight from a dedicated currency broker to help hedge around market uncertainty. This equips finance directors with practical options based on both exposure and budget priorities.
Seamless AML and onboarding support
Onboarding is fast and efficient, with guided AML documentation and dedicated account service. This consistent onboarding throughput supports treasury operations across multiple subsidiaries or divisions.
Real-time market monitoring
We provide market monitoring and tailored alerts linked to key events, like Bank of England rate decisions or macro drivers in your vertical, to inform timely hedge decisions and portfolio reviews.
5. Case example: FMCG X Importer
Here’s the difference a better Treasury Management Plan can make
Business Profile:
A £60m‑turnover UK importer of consumer goods, purchasing from Europe and the U.S., with revenue in GBP but costs in EUR and USD.
Challenge:
Sterling’s 3–4% implied volatility over a 3-6 month period exposes profit margins for both procurement and pricing teams. Forecast accuracy is ±10% across monthly payment cycles.
Strategic Response via Optimal Currency:
- Risk diagnostics identify €10 m of EUR exposure and $8 m of USD exposure over six months.
- A treasury policy sets a 60% hedge ratio using six‑month forwards.
- Execution via forward contracts and limit orders complemented by monthly forecast reviews.
- Named GBP/EUR/USD accounts support reconciliation and cash visibility.
- Transparent reporting provides board-ready documentation on hedge performance and cost savings.
Result:
Stabilised forecasting, reduced currency-driven budget variance, and improved confidence in margins. Savings of £50–70k in FX margin costs versus bank rates, aligned with regulatory requirements and governance needs.
6.Treasury management for portfolio Finance Directors
As the trend for SMEs to employ fractional finance support continues, portfolio Finance Directors may find they are overseeing Treasury Management for more than one client.
Here’s how we can help:
- We can help you run a Treasury diagnostic across your portfolio to map exposures and current processes for each business
- We can define a Risk Policy for each of your clients to establish appetite and toolset aligned with respective boards and audit needs
- Select suitable execution tools for each business with a mix of:
- Forward contracts for predictable needs
- Limits and named accounts to support operating flexibilit
- Align with governance standards to create transparent pricing that supports Consumer Duty, FCA expectations, and internal compliance.
Conclusion
In today’s more volatile landscape, characterised by FX market turbulence, sovereign volatility, and rising complexity, treasury management must move from reactive payments processing to a defined strategic capability.
Finance directors in larger SMEs and mid‑market firms now face the same need for corporate‑grade treasury governance that global companies have long held.
Optimal Currency operates as a trusted strategic partner for your FX and treasury needs, helping businesses to reduce risk, improve budget predictability, and position treasury as a value‑added part of corporate planning.
If you’re interested in a treasury Health‑Check or developing an FX policy for your business, get in touch to arrange a strategy session with one of our Currency Brokers.
