Hedging is essential for managing currency risk, but it's not free—and not all costs are obvious. Here are five hidden costs that often go unnoticed but can significantly impact your bottom line.
This is the difference between the rate you get and the market bid / offer rate, also known as the interbank or benchmark rate. Often bundled into the rate you receive — hard to detect without benchmarking.
Impact: On large notional amounts, even a 0.1% markup can cost thousands.
Forward contracts are priced using interest rate differentials between the two currencies. Some providers adjust or inflate forward points to hide extra margin in the rate.
Impact: Small adjustments in forward points can create significant hidden revenue for the counterparty.
Most corporates don’t have easy access to independent market data, making it difficult to assess whether a quoted forward rate is fair.
Impact: You can’t manage what you can’t measure – opaqueness drives higher costs.
Some treasuries simply accept the first rate they are quoted – especially when working with a single bank. This limits price discovery and prevents competitive pricing.
Impact: Without competitive tension, banks and brokers can widen spreads with little pushback.
If your hedging strategy isn't aligned to actual exposures (e.g., due to outdated data or poor forecasts), you may end up paying unnecessary premiums or leaving risk unhedged.
Impact: Unnecessary financial costs due to poor strategy implementation.
Hidden costs in FX hedging can quietly erode value, especially when they’re baked into pricing or go unchallenged due to lack of transparency. At Tenora, we believe better outcomes shouldn't be the exception — they should be the standard. We're on a mission to eliminate hidden costs and bring clarity, control, and fairness to currency risk management for all businesses.
