Known Unknowns

For American multinationals, the world has rarely felt more uncertain. Since Donald Trump returned to office, trade policy has been dictated more by fiat than institutional process. Tariffs on imported goods have been imposed with little warning and even less consistency. Long-standing alliances are fraying; demand is fragmenting along geopolitical lines; and the dollar—still the world’s primary reserve currency—has grown weaker, more volatile, and increasingly politicised. In such a bewildering landscape, it is tempting to throw up one’s hands and stop trying to predict the future altogether.

Some finance chiefs have drawn the wrong conclusion. If international exposure is impossible to forecast, they reason, why bother hedging it? Surely the costs and complexity of managing foreign exchange risk outweigh the benefits when the entire global trading system seems to be in flux. Better to embrace uncertainty than pay to tame it.

This view is dangerously short-sighted. Hedging currency risk is not about forecasting direction: it is about mitigating the impact of volatility. Companies that leave exposures unhedged are not expressing confidence in their ability to navigate an uncertain world; they are placing blind bets on forces beyond their control. Too often, this results in earnings surprises, margin compression, and competitive disadvantage against firms that have taken steps to insulate themselves.

Indeed, the argument for hedging is stronger in periods of heightened unpredictability. As interest rate differentials shift, capital flows reverse, and policy announcements spark whiplash in currency markets, the value of stability rises. Forward contracts, options, and natural hedging strategies offer not certainty, but clarity, making it possible to price goods, manage budgets, and report earnings without fear of sudden swings in the yen, euro, or yuan. In volatile environments, these are not luxuries: they are prerequisites for rational planning.

Moreover, shareholders and analysts increasingly expect it. A decade ago, FX losses could be brushed off as the cost of doing business internationally. Today, they are viewed as evidence of operational negligence. Companies that hedge effectively are not just protecting their bottom lines—they are demonstrating strategic competence.

None of this is to say that hedging should be indiscriminate. Programs must be tailored, aligned with cash flows, and dynamically managed. But to abandon currency risk management entirely, simply because the world has become unpredictable, is to mistake chaos for inevitability.

Uncertainty is not a reason to stop hedging. It is the reason to start.