At the end of every quarter (and every year), finance teams face immense pressure to close the books quickly and accurately. Can you confidently explain your FX results to senior management? What if an unexpected exposure surfaces at the last minute, resulting in a substantial FX loss? Are you prepared for scrutiny from executives and shareholders, especially if FX impacts must be disclosed on an earnings call?
To help you avoid surprises and gain more control, this post explores the key FX challenges finance leaders are facing—and what it takes to confidently close the books in 2025.
The challenges of FX risk management in 2025
Many companies still grapple with common risk management pitfalls. Over-reliance on spreadsheets, inadequate forecasting, and poor alignment between exposures and hedges continue to create mismatches.
In 2025, with increasing market volatility and rapid global economic shifts, companies must adapt to new challenges, including:
- More frequent intra-month adjustments – Changing market conditions and economic policies require continuous hedge adjustments.
- Heightened forecast deviations – Businesses are struggling with greater uncertainty in revenue and expense projections due to global supply chain disruptions.
- Shifting forward points – Interest rate differentials across major economies have widened, leading to more complex forward point calculations.
- Data integrity challenges – Increased automation and AI-driven analytics are transforming FX risk management, but errors from integration gaps between systems can still lead to incorrect re-measurement entries.
Without the right resources and technology to understand financial results in real time, these challenges can:
- Impact shareholder value.
- Weaken risk management effectiveness.
- Lead to career risks for treasury professionals if FX losses remain unexplained.
When timing is everything, delayed insights can do real damage.
Balance sheet hedging: A key strategy in 2025
For multinational companies, one of the most important elements of FX risk management is balance sheet hedging. Properly managing foreign currency-denominated assets and liabilities helps reduce translation and remeasurement risk, both of which can significantly impact earnings.
Recent trends show that more companies are prioritizing this approach: According to PwC’s 2023 Global Treasury survey, over 70% of large companies (>$10 bn revenue) regularly hedge their balance sheet FX exposures, compared to ~60% hedging anticipated commercial cash flows.
Below are a few key factors to consider.
Automated exposure identification
Leverage AI and analytics tools to systematically identify FX exposures from intercompany transactions, accounts receivable, and payable balances. Improving the accuracy of exposure data is critical, especially given that 93% of treasurers say forecasting errors have led to avoidable financial losses, like unnecessary borrowing or cash shortfalls.
Dynamic hedging strategies
Implement rolling hedge programs to adjust to changing market conditions and ensure consistent risk mitigation. Within corporate finance, treasury teams are catching up to their peers in FP&A and accounting: about 64% of organizations are piloting or actively using AI in treasury operations. This shift is enabling more responsive, data-informed hedging decisions.
Hedge accounting compliance
Ensure adherence to IFRS 9 and ASC 830 to avoid earnings volatility caused by improper hedge documentation or application. IFRS 9 compliance updates in 2025 require more rigorous documentation for hedge accounting, increasing the need for real-time analytics.
Performance monitoring and reporting
Establish real-time dashboards that provide insights into hedge effectiveness, exposure trends, and P&L impact. With currency swings becoming more volatile, especially in emerging markets, staying on top of performance is key to managing risk.
By incorporating a structured balance sheet hedging approach, organizations can enhance financial stability, reduce earnings volatility, and improve overall FX risk management.
What’s required to gain control of FX hedging in 2025?
To navigate these complexities and mitigate FX-related risks effectively, companies must adopt a more robust and tech-driven approach to FX management.
Key steps include:
- Seamless system integration – Ensure the company’s ERP and treasury management systems work together to provide real-time visibility into FX exposures.
- Cross-departmental collaboration – Maintain open communication with finance, procurement, and operations to anticipate currency risks driven by internal and external factors.
- Enhanced data analytics – Use AI and machine learning tools to track and analyze key FX gain/loss drivers, identifying trends that impact financial results.
- Drill-down capabilities – Invest in solutions that allow for granular analysis of transactional data, enabling quick identification of re-measurement inconsistencies and exposure mismatches.
As financial markets continue to evolve, the ability to rapidly assess FX hedging results is critical for maintaining stability and ensuring informed decision-making. By leveraging technology and fostering a proactive risk management culture, companies can turn FX volatility into a competitive advantage rather than a financial liability.
Before closing the books, make sure you’re not making one of the most common (and costly) FX mistakes. Get the full list in our white paper: Top 10 Mistakes That Companies Make in FX Risk Management.