How can SMEs manage currency volatility in emerging markets?

A Swiss SME agrees to purchase goods from a supplier in India, Brazil or China. The invoice is issued in the supplier’s local currency, but the payment will not be made for another two or three months. The amount in the local currency is known. Its final cost in Swiss francs is not.

If the exchange rate moves before the payment date, the company may need more CHF than expected to settle the same invoice. This can affect its cash requirements, purchasing costs or expected gross margin.

Currency movements cannot be predicted with certainty. However this guide explains how SMEs can assess that exposure, include it in their budget and consider the available risk-management options.

Are emerging market currencies really more volatile?

Not every emerging market currency is always more volatile than major currencies. The term covers currencies with very different market structures, economic conditions and exchange-rate regimes.

Some currencies are freely traded and relatively liquid. Others have lower trading volumes, limited offshore availability or controls on how they can be exchanged. A currency managed closely by a central bank may remain stable for a period, while another may move more freely from day to day.

However, some emerging market currencies can experience larger or more abrupt movements when economic, political or market conditions change.

Factors may include:

• changes in inflation or interest rates;

• political or regulatory decisions;

• dependence on commodity exports;

• changes in international capital flows;

• reduced liquidity during periods of market stress;

• central bank intervention or adjustments to foreign exchange controls.

Why can this type of volatility be harder for an SME to absorb?

The effect of an exchange-rate movement depends on the structure of the transaction. An SME may be more exposed when it has already agreed the selling price in CHF but has not yet paid its overseas supplier. If the supplier’s currency strengthens, the purchasing cost rises while the company’s revenue remains unchanged.

The timing of the payment also matters. A longer period between signing a contract and settling the invoice creates more time for the rate to move. Deposits, milestone payments and final balances may each create separate periods of exposure.

Other characteristics of emerging market currencies can make the position more difficult to manage:

• A direct CHF currency pair may not always be sufficiently liquid, so the conversion may pass through the Euro or US dollar.

• The tools available for managing risk are not the same for every currency.

• Domestic and offshore markets may operate differently. This is the case in China for instance.

• Currency controls or local requirements may affect when and how the underlying payment can be made.

 These factors mean that the company needs to assess the currency exposure together with the commercial and payment arrangements.

How can an SME build currency volatility into its budget?

Before a future foreign-currency payment is made, a business needs to estimate what that payment could cost in its home currency. This is where calculating a budget exchange rate becomes useful.

A budget exchange rate is the internal rate used to convert an expected foreign-currency amount into CHF for planning purposes. It may be used when preparing a budget, setting a customer price or estimating the expected gross margin on a transaction. It is a working assumption rather than the market rate.

For example, if a supplier invoice in Indian rupees is due in three months, the company can apply its chosen budget rate to estimate the expected CHF cost. Because the budget rate can influence pricing, cash-flow planning and commercial decisions, the company should record how it was determined, when it was set and where it has been used.

1. Calculate the budget exchange rate  

The budget exchange rate can be calculated by dividing the maximum CHF amount allocated to the payment by the amount due in the foreign currency:  

Budget exchange rate = Budgeted CHF cost ÷ Foreign-currency amount  

For example, if a company expects to pay INR 10,000,000 and has allocated CHF 105,000 to the transaction: CHF 105,000 ÷ INR 10,000,000 = CHF 0.0105 per INR. 

2. Test more than one scenario 

You can then calculate the transaction under several exchange-rate assumptions.

The scenarios do not need to be complex. Their purpose is to show how sensitive the commercial outcome is to the exchange rate. You can then answer these questions: 

• How much additional cost can we absorb? 

• At what point would the expected gross margin become unacceptable? 

• Would we need to change the sales price, payment schedule or purchasing decision? 

• Does the amount of exposure justify considering a risk-management tool? 

What can a business adjust before considering a hedge?

Depending on the transaction, a business may be able to adjust its commercial or operational setup to reduce uncertainty. 

Possible measures include: 

• requesting quotations in both the supplier’s local currency and a major international currency; 

• negotiating a deposit or staged payment schedule; 

• reducing the period between confirming the order and making the payment; 

• shortening the validity period of customer quotations; 

• using incoming funds or an existing balance in the same currency to make the payment; 

• reviewing whether prices can be adjusted if exchange rates move beyond an agreed level; 

• separating confirmed orders from purchases that remain uncertain. 

Please note that accepting a quotation in USD or EUR does not remove currency risk automatically. The supplier may already have included its own conversion costs or risk assumptions in the price.

When can a forward contract or an NDF be useful?

If the remaining exposure could materially affect the business, the company may consider a currency risk-management instrument.

Deliverable forward contract

A deliverable forward contract allows a business to agree an exchange rate for a conversion that will take place on a future date or during an agreed period. 

This can provide greater certainty over the future CHF cost when the amount and timing are sufficiently clear. 

The company should also understand that the agreed rate remains binding even if the market later moves in its favour. Changes to the underlying transaction may require the contract to be adjusted or closed, which can create additional costs.

Non-deliverable forward 

For some emerging market currencies, a business may need to manage its FX exposure even though the currency cannot be delivered through a standard forward contract, or an NDF offers a more suitable hedging structure.  

This is where a non-deliverable forward, or NDF, can be useful. An NDF allows the company to manage the CHF impact of a future payment or receipt without receiving or delivering the emerging market currency through the hedge itself. At maturity, the agreed forward rate is compared with a specified reference rate. The difference is then settled in another major currency. The underlying commercial payment remains separate. 

An NDF may therefore be useful when local convertibility rules or market restrictions limit delivery of the currency through the hedge. 

SwissFx offers deliverable forward contracts for selected emerging market currencies and NDFs for currencies including the Indian rupee, Brazilian real, onshore Chinese renminbi, South Korean won and South African rand.

Compare SwissFx risk-management capabilities for selected emerging market currencies (May 2026)

Important: Availability and permitted transaction directions vary by currency and must be confirmed for each exposure. A hedge is intended to reduce uncertainty. It does not guarantee that the company will obtain the most favourable rate available during the period.

How could an SME manage a volatile supplier payment in practice? 

Hypothetical scenario: a Swiss importer paying an Indian supplier 

A Swiss SME imports components from an Indian supplier. The supplier invoices the company in Indian rupees, with a deposit due when the order is confirmed and the remaining balance payable 90 days later. 

The SME has already agreed the selling price of the finished products in Swiss francs. Its budget therefore includes an assumed INR/CHF exchange rate and an expected gross margin. 

The finance team calculates the expected CHF cost using the budget rate. A second calculation tests a moderate movement against the Swiss franc, while a third shows the effect of a more significant movement. 

The first adverse scenario would increase the purchasing cost but remain within the company’s tolerance. Under the stress scenario, however, the expected gross margin on the confirmed order would fall below the level approved by management. 

The business reviews whether the exposure can be reduced operationally. It has no INR revenue or existing INR balance, and bringing the final payment forward would place unnecessary pressure on its working capital. 

The company therefore asks its provider which risk-management instruments are available for the confirmed balance. An INR NDF may be an option, depending on the direction, amount, maturity and underlying transaction. 

The supplier payment in INR will still need to be arranged separately from the NDF settlement.

What should an SME check before choosing its approach?

​How does SwissFx support emerging market currency risk management?

SwissFx provides international payment and currency exchange capabilities across more than 140 currencies. Risk-management solutions are also available for selected emerging market currencies through deliverable forward contracts and NDFs. 

The available solution depends on the specific exposure. SwissFx can work with your business to review: 

• the currency, amount and payment schedule; 

• the company’s budget assumptions and risk tolerance; 

• the availability of deliverable forwards or NDFs; 

• the coordination between the hedge, currency conversion and supplier payment. 

Important: this article is provided for general information only. It does not constitute financial advice or a recommendation to enter into any particular transaction. The suitability of any FX risk-management solution depends on the specific circumstances of the business.