Market Conditions

The Rise Of Currency Hedging And Risk Management

Currency hedging has long been a part of global business and trade — but now it is becoming more important thanks to increasing economic and political volatility. In a new PYMNTS interview, Karl Schamotta, regional director of risk management solutions at Cambridge Global, which sells currency hedging and related services — tasks that have recently assumed greater importance in eCommerce and other industries because of the stronger U.S. dollar and other factors — explores those issues from the point of view of farmers.

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.



The PYMNTS Cross-Border Merchant Friction Index analyzes the key friction points experienced by consumers browsing, shopping and paying for purchases on international eCommerce sites. PYMNTS examined the checkout processes of 266 B2B and B2C eCommerce sites across 12 industries and operating from locations across Europe and the United States to provide a comprehensive overview of their checkout offerings.