Navigating the challenges of FX risk: how Embedded Finance is changing the game

Global business expansion is no longer an aspiration—it’s a necessity for companies looking to thrive in competitive markets. However, the promise of cross-border trade comes with a significant caveat: managing foreign exchange (FX) risk. Currency volatility, market complexities, and hidden costs continue to challenge businesses engaged in international operations. As Embedded Finance redefines how financial tools are integrated into workflows, solutions like okoora’s anticipated FX360 are proving indispensable in tackling these challenges.

The scale and impact of FX risk

The global forex market is dynamic, trading over USD 7.5 trillion daily, according to the Bank for International Settlements. While this liquidity is essential for international commerce, it also introduces significant volatility. For businesses, FX risk takes on various forms:

Transaction risk: When exchange rates fluctuate between a transaction’s initiation and settlement, they directly impact profit margins.
Translation risk: Currency fluctuations affect financial statements, particularly for multinational companies consolidating results across borders.
Economic risk: Long-term exchange rate shifts can erode a company’s competitive positioning in global markets.

In practical terms, businesses face added costs that compound over time. For instance, cross-border payment fees average USD 27 per transaction, excluding FX spreads, according to a 2021 report by J.P. Morgan. This adds considerable overhead for businesses processing hundreds or thousands of payments monthly.

Cross-border trade in a complex world

Cross-border payment flows now exceed USD 150 trillion annually according to a McKinsey 2023 report, driven by the acceleration of globalisation and ecommerce. Moreover, the Bank of England forecasts cross-border payments will exceed USD 250 trillion by 2027. Despite this growth, inefficiencies persist:

Slow settlement times: Payments can take 2–3 days to clear, creating operational bottlenecks.
Opaque pricing: Lack of transparency in FX rates and fees often leaves businesses at a disadvantage.
Regulatory complexity: Varying compliance requirements across regions make FX risk management a resource-intensive process.

These challenges underscore the need for seamless, automated solutions that empower businesses to navigate this complex environment while minimising costs and risks.

The Embedded Finance paradigm

Embedded finance represents a significant shift in the way businesses approach financial management. By integrating financial tools directly into operational systems, companies can:

Automate time-intensive processes like FX calculations and risk analysis.
Gain real-time insights into financial exposures.
Streamline compliance with regional and international regulations.

A growing market valued at USD 83.32 billion in 2023, Embedded Finance is projected to grow at a compound annual growth rate (CAGR) of 32.8% through 2030. This rise reflects its broad applications, from payment processing to risk management, and its ability to meet the demands of an increasingly globalised economy.

FX360: transforming FX risk management

Okoora’s upcoming FX360 is a case study detailing how Embedded Finance addresses real-world challenges. Developed to seamlessly integrate into payment workflows, FX360 empowers businesses with tools to monitor, manage, and mitigate FX risk with unprecedented efficiency.

What sets FX360 apart:

Automated hedging: The solution automates complex hedging strategies, reducing manual intervention and mitigating human error.
Real-time insights: Businesses can monitor currency movements and exposures in real-time, enabling proactive decision-making.
Cost optimisation: By accessing multiple liquidity providers, FX360 ensures competitive pricing for currency conversions.
Seamless integration: Its user-friendly dashboards integrate directly into existing systems, reducing the learning curve for financial teams.

These features translate into tangible benefits for businesses, including improved cash flow predictability, lower operational costs, and greater resilience against market volatility.

Industry trends driving innovation

Several macroeconomic and technological trends are driving the evolution of FX risk management:

Increased market volatility: Global events, from geopolitical tensions to economic policy shifts, are exacerbating currency fluctuations, making risk management tools indispensable.
Technological advancements: Innovations in AI and blockchain are transforming how businesses approach financial operations, enabling faster and more accurate analysis.
Demand for transparency: As businesses demand greater transparency in FX pricing, solutions like FX360 are filling the gap by offering clear, data-driven insights.

Benjamin Avraham, the CEO and founder of okoora, underscores the importance of integrating technology and strategy in addressing FX risk. “Managing FX is no longer about hedging against the unknown—it’s about leveraging the right tools to stay ahead of market dynamics,” he explains. For Avraham, Embedded Finance isn’t just a trend; it’s the future of financial management. By bringing these tools closer to businesses, companies can unlock efficiencies and focus on growth.

Statistics that illustrate the need

These statistics illustrate both the challenges and opportunities in the FX space, positioning solutions like FX360 as timely and necessary.

Daily FX market activity: Over USD 7.5 trillion is traded daily in the forex market, highlighting the scale of currency fluctuations.
Cross-border fees: Average transaction costs of USD 27 per cross-border payment add significant overhead for businesses operating at scale.
Embedded Finance growth: The market for Embedded Finance is projected to grow at a 32.8% CAGR, reflecting its widespread adoption.

A future built on Embedded Finance

As global businesses continue to scale, the integration of financial tools into everyday workflows will become non-negotiable. Embedded Finance, with its ability to simplify complex processes and enhance decision-making, represents the next frontier in financial innovation.

FX360, as part of this shift, will exemplify how businesses can navigate currency complexity while focusing on what they do best. By embracing this approach, companies can ensure financial stability, reduce operational risks, and unlock new opportunities in the global marketplace.

About Benjamin Avraham

Benjamin Avraham is a fintech innovator, founder and CEO of okoora, a company dedicated to empowering businesses to simplify and optimise cross-border finance. Prior to okoora, Benjamin spent nearly two decades establishing and managing Ofakim Group, a financial services and risk advisory firm. Under his leadership, okoora has been recognised by CNBC and The Europas as a trailblazer in the global fintech space. With a focus on blending financial acumen with innovative technology, Benjamin specialises in driving smarter global operations.

About Okoora

Okoora is a fintech provider offering businesses worldwide the financial infrastructure needed to scale their international operations. Recognised by CNBC and Statista as one of the world’s top 250 fintechs, the company’s automated platform, API, and Embedded Finance solutions empower businesses to collect and send payments, manage multi-currency accounts, and hedge FX risks. Okoora enables seamless operations in over 100 currencies and 180 countries.