The Rise Of Currency Hedging And Risk Management

Schamotta talked about managing risk and hedging currency fluctuations in, perhaps, the world’s oldest form of production and commerce — a job that’s become more difficult in recent years, even with the benefits of digitalization.

“We’re seeing more economic and political volatility than we’ve seen in a long time, along with a lot of trade concerns,” Schamotta said. “The environment is a lot more unpredictable.”

Hedging — as in preparing for currency fluctuations and other factors — is something that eCommerce firms need to embrace, too, as another PYMNTS story demonstrates.

When Netflix reported its Q2 financials, its failure to “hedge its revenue with derivatives,” according to Reuters, led the company to lower its 2018 operating margin expectations to the lower end of its 10-to-11 percent projection. “We’ve got some adjustments to make because of foreign exchange rates, and we know we’ll make those adjustments and we’ll grow into that,” said Netflix’s chief content officer, Ted Sarandos, during the company’s post-earnings conference call.

The world is not getting any more stable — not for a while. You can be sure risk management will continue to gain importance.