--- title: "Developing and implementing a hedging policy: Managing cashflow exposure is key to informed hedging practices | Corpay" description: The first step in risk management is to analyze FX exposure and measure the effects of the movement of rates on the company’s liquidity. Read and learn more. image: https://cb.corpay.com/hubfs/Imported_Blog_Media/Risk_Visualizer_blog_thumbnail.png --- [Skip to content](https://cb.corpay.com/resources/blog/developing-and-implementing-a-hedging-policy#main-content) ![Corpay Cross Border Payments](https://cb.corpay.com/hs-fs/hubfs/Corpay_Final-Logo_No-TM_Two-Tone_Black.png?width=130&height=35&name=Corpay_Final-Logo_No-TM_Two-Tone_Black.png) - [Blogs](https://cb.corpay.com/resources/blog) - [Whitepapers](https://cb.corpay.com/resources/whitepapers) - [Case Studies](https://cb.corpay.com/resources/case-studies) Open main navigation Close main navigation - [Blogs](https://cb.corpay.com/resources/blog) - [Whitepapers](https://cb.corpay.com/resources/whitepapers) - [Case Studies](https://cb.corpay.com/resources/case-studies) - [Contact us](https://www.corpay.com/contact-us/cross-border) [Contact us](https://www.corpay.com/contact-us/cross-border) Apr 11, 2023 # Developing and implementing a hedging policy: Managing cashflow exposure is key to informed hedging practices ![Picture of Moiz Mujtaba](https://cb.corpay.com/hs-fs/hubfs/Imported%20sitepage%20images/image-2.webp?width=50&name=image-2.webp) [Moiz Mujtaba](https://cb.corpay.com/resources/blog/author/moiz-mujtaba) Share: [facebook-f icon](http://www.facebook.com/share.php?u=https://cb.corpay.com/resources/blog/developing-and-implementing-a-hedging-policy) [Share this page on LinkedIn](http://www.linkedin.com/shareArticle?mini=true&url=https://cb.corpay.com/resources/blog/developing-and-implementing-a-hedging-policy) [Share this page on Twitter](https://twitter.com/intent/tweet?url=https://cb.corpay.com/resources/blog/developing-and-implementing-a-hedging-policy) [Share this page on Email](mailto:?body=https://cb.corpay.com/resources/blog/developing-and-implementing-a-hedging-policy) With continuing uncertainty in the global economy, central banks are using interest rates as levers to manage regional inflation. This increases currency volatility. Thus foreign exchange (FX) risk management increases in complexity for many small and mid-size enterprises (SMEs) because most of their cashflows are subject to *changeable* exchange rates. While your organization may be focused on driving a robust FX risk management practice, it is a multi-faceted undertaking, involving a range of analyses, modelling outcomes, and “decision gates.” Taking it step by step makes it much less daunting. In our blog series on developing and implementing your tailored hedging strategy, we take a ‘best practices’ approach to help you understand the process and outline the steps you may take to analyze exposures, create a hedging policy, implement and manage your hedging strategy. The first step in risk management is to analyze FX exposure and measure the effects of the *movement of rates* on the company’s liquidity.     M**onitoring cashflows from distributed windows** or different platforms is a time-consuming, painstaking process. Your liquidity is tied to cashflows, which may help you identify transactional risk that could occur from a specific exposure. Move past this stage with flying colors and you can execute an informed hedge to mitigate your exposure. Analysis of the risk profile for each currency in your cashflow forecast takes you far in defining your tailored hedge strategy—one that matches your business profile. Here are a few best practices that may help you streamline your risk exposure analysis:     - **Structure your analysis**. Analyzing exposures could happen by the entity, business unit, or division, or even on the group level. Whether you are managing FX risk using a spreadsheet such as Excel, or another tool, ensuring you always have all the data available will help you to make the most thorough exposure analysis for your group or smaller entities. - **Balance opportunities and costs**. Few companies perform a structured risk analysis to identify optimization opportunities in such a way that there is a perfect combination of minimizing losses and potentially gaining wins from market fluctuations, whilst keeping the cost of hedging in check. - **Set your FX Risk Policy.** Do you have an FX Risk policy in place? That can help you to set your medium-term and long-term targets. For a coherent response to FX volatility in cashflow forecasts, hedged positions and business profile, a holistic FX policy will help define thresholds that you can benchmark while managing FX exposure. It is important that your FX risk management policy buys you enough time for the effects of the commercial response to be evident. That depends on your business cycle: some businesses plan monthly; others quarterly; stull others annually. - **Start with a Currency Map.** The challenge of creating your foreign exchange risk management policy may seem a little overwhelming: in practical terms, where do you start? Put simply, if there is any degree of complexity involved, start with a ‘Currency Map’ to visualize market fluctuations alongside your cashflows. - Your base currency may not be the transactional currency that is part of your cashflow forecast, and mapping the underlying exposure in your base currency becomes tedious without an automated cashflow mapping tool. Evaluate your options and look for a cashflow risk management tool that can accommodate the elements of your unique FX strategy. - **Consult an expert.** Engage with subject matter experts like Corpay’s analytics team, who have developed tools to help clients perform exposure analysis and reporting as well as hedging, or leverage a self-serve risk management platform to visualize your cashflows.     Also, bear in mind that your hedging tactics may need to adapt to changes in your business and in the markets. Capturing your exposures and recognizing potential sources of risk is a good first step in developing and implementing a policy that helps you achieve your goals. In future posts, we’ll describe best practices for setting your goals, developing your policy, and monitoring performance. Understanding the process can help increase your confidence in managing risk no matter where your business takes you. [Read the next article in the series: Key considerations in your foreign exchange exposure analysis](https://cb.corpay.com/resources/blog/key-considerations-in-your-foreign-exchange-exposure-analysis)     [Currency Risk Management](https://cb.corpay.com/resources/blog/tag/currency-risk-management), [Risk Visualization](https://cb.corpay.com/resources/blog/tag/risk-visualization) ## Related posts [![](https://cb.corpay.com/hs-fs/hubfs/Imported_Blog_Media/tall-building-v2.jpg?height=200&name=tall-building-v2.jpg)](https://cb.corpay.com/resources/blog/the-what-of-hedging) [Currency Risk Management](https://cb.corpay.com/resources/blog/tag/currency-risk-management) ## [The WHAT of Hedging](https://cb.corpay.com/resources/blog/the-what-of-hedging) ![Picture of Corpay Cross-Border](https://cb.corpay.com/hs-fs/hubfs/Brand%20Logos/Corpay_Final_Avatar_caret_dark.png?width=50&name=Corpay_Final_Avatar_caret_dark.png) [Corpay Cross-Border](https://cb.corpay.com/resources/blog/author/admin) Nov 16, 2023 The WHAT of Hedging: Choosing a hedging product or structure that aligns to your strategy and your... [Read more](https://cb.corpay.com/resources/blog/the-what-of-hedging) [![](https://cb.corpay.com/hs-fs/hubfs/Imported_Blog_Media/Looking_Upwards.jpg?height=200&name=Looking_Upwards.jpg)](https://cb.corpay.com/resources/blog/fp-and-a-and-hedging-integrating-scenario-analysis) [Currency Risk Management](https://cb.corpay.com/resources/blog/tag/currency-risk-management) ## [FP&A and Hedging: Integrating scenario analysis](https://cb.corpay.com/resources/blog/fp-and-a-and-hedging-integrating-scenario-analysis) ![Picture of Sean Coakley](https://cb.corpay.com/hs-fs/hubfs/Imported%20sitepage%20images/Sean%20Coakley.jpg?width=50&name=Sean%20Coakley.jpg) [Sean Coakley](https://cb.corpay.com/resources/blog/author/sean-coakley) Feb 13, 2024 FP&A and Hedging: Integrating scenario analysis The unpredictability of foreign exchange markets... [Read more](https://cb.corpay.com/resources/blog/fp-and-a-and-hedging-integrating-scenario-analysis) [![](https://cb.corpay.com/hs-fs/hubfs/Imported_Blog_Media/2.jpg?height=200&name=2.jpg)](https://cb.corpay.com/resources/blog/the-how-of-hedging) [Currency Risk Management](https://cb.corpay.com/resources/blog/tag/currency-risk-management) ## [The HOW of Hedging](https://cb.corpay.com/resources/blog/the-how-of-hedging) ![Picture of Corpay Cross-Border](https://cb.corpay.com/hs-fs/hubfs/Brand%20Logos/Corpay_Final_Avatar_caret_dark.png?width=50&name=Corpay_Final_Avatar_caret_dark.png) [Corpay Cross-Border](https://cb.corpay.com/resources/blog/author/admin) Nov 15, 2023 The HOW of Hedging: How you build your strategy, implement it and monitor it Next, we address the... [Read more](https://cb.corpay.com/resources/blog/the-how-of-hedging) --- [![Corpay Cross Border Payments](https://cb.corpay.com/hs-fs/hubfs/Corpay_Final-Logo_No-TM_Two-Tone_Black.png?width=130&height=35&name=Corpay_Final-Logo_No-TM_Two-Tone_Black.png "Corpay Cross Border Payments")](https://www.corpay.com/cross-border) [linkedin-in icon](https://www.linkedin.com/showcase/corpay-cross-border-solutions/) [X Twitter icon](https://twitter.com/CorpayFX) [vimeo-v icon](https://vimeo.com/corpay) [microphone icon](http://corporate-payments.corpay.com/fintech-in-focus-podcast/) [Follow us on Facebook](https://www.youtube.com/@CorpayCrossBorder) --- ## "Cambridge Global Payments” and “AFEX” are trading names that may be used for the international payment solutions and risk management solutions provided by certain affiliated entities using the brand “Corpay”. International payment solutions are provided in Australia through Cambridge Mercantile (Australia) Pty. Ltd.; in Canada through Cambridge Mercantile Corp.; in Switzerland through Associated Foreign Exchange (Schweiz) AG; in the United Kingdom through Cambridge Mercantile Corp. (UK) Ltd.; in Ireland and the European Economic Area on a cross-border basis through Associated Foreign Exchange Ireland Ltd.; in Jersey and the Channel Islands through AFEX Offshore Ltd.; in Singapore through Associated Foreign Exchange (Singapore) Pte. Ltd. and in the United States through Cambridge Mercantile Corp. (U.S.A.). Risk management solutions are provided in in Australia through Cambridge Mercantile (Australia) Pty. Ltd.; in Canada through Cambridge Mercantile Corp.; in the United Kingdom through Cambridge Mercantile Risk Management (UK) Ltd.; in Ireland and the European Economic Area on a cross-border basis through AFEX Markets Europe Ltd.; in Jersey and the Channel Islands through AFEX Offshore Ltd.; in Singapore through Associated Foreign Exchange (Singapore) Pte. Ltd. and in the United States through Cambridge Mercantile Corp. (U.S.A.). Please refer to http://cross-border.corpay.com/brochure-disclaimers for important terms and information. ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "Moiz Mujtaba", "url" : "https://cb.corpay.com/resources/blog/author/moiz-mujtaba" }, "dateModified" : "2025-07-30T16:43:56.013Z", "datePublished" : "2023-04-11T13:30:00.000Z", "headline" : "Developing and implementing a hedging policy: Managing cashflow exposure is key to informed hedging practices | Corpay", "image" : [ "https://cb.corpay.com/hubfs/Imported_Blog_Media/Risk_Visualizer_blog_thumbnail.png" ], "mainEntityOfPage" : { "@id" : "https://cb.corpay.com/resources/blog/developing-and-implementing-a-hedging-policy", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://cb.corpay.com/hubfs/Corpay_Final-Logo_No-TM_Two-Tone_Black.png" }, "name" : "Corpay" } } ```