Foreign exchange risk

Exposure to currency movements between agreeing a price and being paid.

What it means

FX risk arises whenever revenue or costs are in a currency other than the one your costs or reporting are in.

Why it matters

A margin can be wiped out by a currency move between quoting and settling, and on a thin-margin product it does not take much.

What it looks like in practice

Options: price in your own currency and push the risk to the customer, match currency revenues to currency costs, or hedge with a forward contract fixing the rate.\n\nA forward is a commitment, not an option — you must settle it.

What to watch out for

The spread. Banks and brokers make money on the rate as much as on the fee, and the difference between providers on a large transfer is substantial.

Where to get proper advice

An FCA-regulated broker, and your bank. Compare the total cost including the spread, not the headline fee.