FX volatility drives shift to automated risk management

By Vriti Gothi

Rising currency volatility and escalating hedging costs are pushing corporates to rethink how they manage foreign exchange risk, with technology and automation set to play a more central role in treasury operations over the next year.

The pressure is being compounded by sharply higher hedging costs. Huttman said the cost of hedging has increased by an average of 66% in the UK and 76% in North America. Despite this, corporate participation in FX hedging is at record levels, reflecting a broader shift in risk appetite. An estimated 78% of UK corporates and 91% of North American firms now hedge their currency exposure.

This trend comes at a time when corporates are facing tightening credit conditions and ongoing operational cost pressures. As a result, treasury teams are being forced to achieve greater efficiency with constrained budgets. Huttman expects AI and automation to become critical enablers in 2026, helping CFOs and treasurers streamline manual processes, centralise workflows, and improve execution efficiency across hedging programmes.

Eric Huttman, CEO at MillTech, said, “After another year defined by currency volatility and the highest FX volumes on record, corporates can no longer treat currency risk as a background issue. Tariff-driven market uncertainty may be cooling, but geopolitical tensions remain, and 2026 will continue to demand an agile approach. Hedging is getting expensive, with costs increasing by an average of 66% in the UK and 76% in North America. Yet despite operational cost pressure and tightening credit conditions, more corporates are hedging than ever. 78% of UK corporates and 91% of North American firms now hedge, recognising that the cost of protection is still far less than the price of exposure.”

Strategically, corporates are also adjusting their hedging posture in response to shifting macroeconomic expectations. A majority of UK and US firms now anticipate interest rate hikes by their respective central banks next year. This increased confidence in policy direction is translating into more proactive risk management, with over 90% of corporates planning to raise hedge ratios and extend hedge tenors to lock in protection against further market disruption.

Taken together, the data point to a structural shift in corporate FX risk management. As volatility persists and hedging becomes more expensive, technology-led optimisation is emerging as a key differentiator for finance teams seeking to balance cost control with resilience in an increasingly uncertain global environment.