Local businesses across America (especially here on the Westside) are more global than ever. Today, there are more businesses importing raw materials, a lot more selling to international customers, and working with overseas suppliers. All of this means that cross-border transactions have become a normal part of doing business, blurring the line between what we traditionally think of as “local” and what’s clearly international in scope. However, with that global reach comes exposure to something many local business owners never really thought about in the past: currency risk.
With the recent volatility in the dollar and evolving trade policies around the world, understanding how to manage this risk isn’t just smart, it’s non-negotiable, especially if you want to survive. In this guide, we’ll break down the major currency challenges local businesses are facing in 2025 and walk through practical ways to manage them effectively.
Understanding Currency Risk
If you own a local business that deals with any kind of international transaction, no matter how little, you’re exposed to the possibility of losing or gaining money when there’s a shift in foreign exchange rates. That’s essentially what currency risk (or foreign exchange risk) is. Let’s say one week the U.S. dollar is stronger compared to another currency, which makes your imported materials cheap. But by the time you’re making the payment, the exchange rate has moved, and those same supplies now cost you 12% more than you planned for. That’s the reality for many local businesses operating on the global stage today.
Like any risk, there’s a chance that you can come out ahead. But recently, the odds are stacked against businesses trading with USD. Over the last few months, USD has been very unstable, reacting to a mix of inflation pressure, shifting interest rates, and geopolitical uncertainty. There are also trade tensions and tariff-driven policies under the current administration that continue to reshape how local businesses can operate globally. On top of that, currency markets are becoming increasingly volatile, and the stock market hasn’t offered much reassurance either.
Types of currency risk
- Transaction Risk
This is the most obvious type of currency risk, and the one most businesses trading internationally must have experienced. It happens when you agree to pay (or get paid) in a foreign currency. Say, for example, you’re sourcing custom packaging from Europe and the euro jumps in value before your payment is due. That price increase hits instantly, and if it’s too late to renegotiate, you could be out a few thousand dollars without warning. For businesses with tight margins, that kind of hit can throw off your entire budget.
- Translation Risk
If your business owns assets abroad, like a stake in an international partner, or even just holding accounts in a different currency, you’re open to this currency risk. On paper, those assets might lose value when it’s time to convert everything back into U.S. dollars. So, you’re not losing cash directly, but it can show up in your financial statements and impact how lenders or investors view your business.
- Economic Risk
This one’s less obvious but just as serious. Economic risk is about the long-term impact of currency fluctuations on your overall competitiveness, not just one transaction. For example, if the U.S. dollar strengthens significantly over time, your product or service could become more expensive in foreign markets, making it harder to compete with local players abroad. On the flip side, if a key supplier’s currency weakens, they might raise prices to protect their margins, which means you’re stuck paying more. Economic risk creeps in gradually. You might not feel it in a single invoice, but over time it can affect how you price, where you source, and which markets make sense to grow in.
Practical Risk Management Strategies for Westside Businesses
- Use Forward Contracts or Currency Hedging Tools
One of the most accessible tools for local businesses to manage currency risk is a forward contract. Essentially, a forward contract is a simple agreement that lets you lock in an exchange rate at a particular moment for a future payment. This protects your business from unexpected swings in the currency market.
Alongside that, some successful Westside entrepreneurs are exploring tools like the MT4 trading platform to keep a closer eye on global currency movements in order to plan and trade better with their international clients. The whole idea is to make sure that you’re aware of what is going on in the global currency market and use it to your advantage.
- Invoice in USD Whenever Possible
There’s arguably no easier way to sidestep currency fluctuations than to invoice and be invoiced in U.S. dollars. Why? Well, it keeps things straightforward, there are no surprises when exchange rates shift, no scrambling to adjust pricing or rework your margins. For many Westside businesses, especially those exporting products or services, this kind of stability can be a game-changer.
That said, insisting on USD might limit your negotiation power with overseas suppliers who prefer dealing in their local currency. The key is knowing when it makes sense.
- Diversify Suppliers and Customers
If your business is heavily tied to one country or currency, you’re more exposed than you might think. One sharp devaluation, or a policy shift (like a new tariff) and your supply chain or revenue stream could get thrown off course. That’s why it makes sense to diversify. Look for alternative suppliers in regions with more stable currencies or those willing to trade in USD. If you’re on the customer side of things, expanding into markets with lower FX volatility can help stabilize revenue.
- Leverage Stablecoins (With Caution)
Stablecoins are starting to shape up to be the future when handling cross-border payments, especially if you’re working with overseas partners or clients open to the developments in the digital finance space. Stablecoins are pegged to traditional currencies like the U.S. dollar, so they don’t swing wildly with the market like other cryptocurrencies, giving them more stability. They have the added advantages of faster settlement and fewer fees compared to your typical wire transfer.
However, the regulatory landscape around digital assets is tightening, and new U.S. legislation has put clear guardrails in place. If you’re considering using stablecoins, work with fintech platforms that handle compliance, KYC, and currency conversion for you.
Currency Risk Isn’t a Niche Problem
Managing currency risk isn’t just about protecting your margins, it’s about making sure your business can scale without being blindsided. As more local businesses in the U.S. and on the westside go global, ignoring exchange rate exposure becomes a liability. So, whether it’s through smart invoicing, strategic timing, or digital tools like stablecoins, you have options to protect yourself.
