Over 75% of firms faced FX losses without hedging in 2024
New research from MillTechFX indicates that in 2024, over three-quarters of firms suffered losses from unhedged foreign exchange (FX) risk.
The Corporate Hedging Monitor by MillTechFX included a survey conducted in January 2025 among 250 senior finance decision-makers within UK and US corporations. The findings reveal that the most common adjustments anticipated in hedging strategies this year, necessitated by the high volatility experienced in 2024, include purchasing more options, prolonging hedge durations, and altering banking providers.
Credit availability emerged as the primary external factor influencing hedging decisions for US and UK firms, suggesting a persistence of the lending credit crunch. This environment has pressured corporations to reassess their hedging approaches amid ongoing financial challenges.
An analysis of hedging patterns showed a reduction in the hedge lengths for both UK and US corporations in the final quarter (Q4) of 2024, compared to the third quarter (Q3). The overall hedge duration decreased from 6.86 months to 6.47 months.
Conversely, companies in both regions increased their hedge ratios during the same period. There was a rise in the proportion of FX exposure that firms elected to hedge from 47% in Q3 to 52% in Q4.
Eric Huttman, Chief Executive Officer of MillTechFX, provided insight into these findings: "The latest data highlights that companies are acutely aware of the potential financial risks posed by unhedged FX exposure. As we saw with the events of last year, foreign exchange volatility can have a significant impact on corporate margins. Consequently, firms are making strategic adjustments to better manage risk and protect their profitability."
The research underscores the growing emphasis on proactive risk management as companies navigate the challenges of foreign exchange volatility. With adjustments in hedging strategies and a focus on mitigating financial exposure, businesses appear to prioritise greater stability in an unpredictable economic environment.
