From volatility to visibility: why foreign exchange strategy can no longer be reactive 

In today’s volatile market environment, currency movements are increasingly reshaped within hours by geopolitical events and other external market factors, creating frequent shocks in the system that can negatively impact businesses. To adapt, businesses can no longer treat foreign exchange (FX) and treasury management as short-term transactional or reactive functions, according to Citadel Global Managing Director, Bianca Botes. 

“FX and treasury management need to evolve into a structured, forward-looking discipline that actively protects business performance and preserves value through uncertainty,” says Botes. “Businesses and investors should rethink their approach to currency risk, moving from short-term decision-making to strategic positioning that is resilient across multiple market scenarios,” she advises. 

How forex and treasury functions are shifting 

“FX risk is no longer cyclical in the classical sense. It is becoming structurally event-driven,” says Botes. 

“The pattern of long, gradual currency cycles punctuated by occasional shocks has given way to bursts of intense volatility triggered by geopolitical developments, central bank repricing or sudden shifts in global risk appetite,” explains Botes. “The risk businesses face is not simply that the rate moves against them, it is that the move arrives faster than their decision-making process can respond. FX has shifted from a treasury input to a board-level strategic concern,” she adds. 

Markets are no longer linear 

Botes explains that three converging forces are making currency movements more unpredictable and event-driven. Firstly, geopolitical fragmentation, from Middle East conflict to US-China trade tension and ongoing sanctions disputes, is generating headline risk on a near-weekly basis. Secondly, monetary policy expectations are recalibrating in real-time as central banks respond to inflation, growth and financial stability concerns simultaneously. And thirdly, market structure has changed, and algorithmic execution and concentrated liquidity windows mean that when sentiment shifts, the move happens in minutes rather than days. 

“The result is currency pairs that can travel three to five percent on a single headline,” says Botes. 

This volatility translates into significant real-world business risk. For importers, it manifests as margin compression, while exporters face revenue uncertainty that distorts pricing and reinvestment decisions,” says Botes. “Even a two to three percent adverse move can absorb the operating margin on thin-margin product lines, making the cumulative effect across the year far larger than the headline volatility suggests,” she notes. 

Discipline over prediction 

Botes identifies four common mistakes businesses make: waiting for certainty before acting, treating FX as a single decision rather than layered ones, mistaking a forecast for a strategy and poor governance. 

“Too many businesses still execute FX through a finance team without clearly defined risk appetite, cover ratios or escalation triggers, which means decisions get made under pressure rather than under structure. Waiting for certainty often results in missed opportunities or forced decisions at unfavourable levels,” says Botes. 

“The businesses that succeed at timing are not the ones predicting better; they are the ones who happen to be right once. A structured approach delivers a consistent average rate across the cycle and removes the emotional element from execution. The mathematics of consistency beats the mathematics of prediction over time,” she adds. 

Turning volatility into opportunity 

A well-structured strategy involves a clear mandate from the board, defined risk appetite and target cover ratios by exposure type, approved instruments and clear escalation rules. Operationally, it also relies on rolling exposure visibility and layered execution that scale hedge cover, rather than point-in-time snapshots, says Botes. 

“Volatility creates opportunity for businesses positioned to act,” Botes explains. “The key is to use a mix of forwards, options and structured products matched to the commercial cycle rather than to a market view. And to review it continuously, against scenarios rather than against a single base case,” Botes advises. 

She says, “Pre-defined levels and scenario planning turn FX management from a reactive function into a prepared one. They replace urgency with discipline, which is the single biggest improvement most treasuries can make.” 

What it looks like to be more strategic 

To become more strategic with their forex and treasury functions, businesses can start with three steps: visibility, governance and execution, says Botes. 

“For an agricultural exporter, say a citrus or table grape producer with a six-to-nine month sales cycle, that means mapping forward order books in euros and pounds, defining cover ratios that scale up as harvest approaches, and using collars to protect a minimum revenue rate without sacrificing all upside,” she says. 

Botes adds that, “For a mining services importer of euro-denominated parts, it means a rolling twelve-month forward exposure schedule, pre-approved hedging tranches at defined rate levels, and a clear governance line on when treasury can act without escalation. The principles are the same. The structures should fit the commercial reality.” 

“Over a 12-month period, the difference between disciplined layering and discretionary timing is often the difference between a three percent improvement in average rate and a five percent deterioration,” she says. 

Botes concludes that “business leaders need to shift their mindsets. Stop asking where the rate is going. Start asking what level protects the business and when to act. The first question has no reliable answer. The second has a process behind it. Once the conversation in the boardroom moves from forecast to framework, FX stops being a source of anxiety and starts being a source of certainty”.