Internal techniques to manage/reduce forex exposure include the following −

●      Invoice in Home Currency − An easy way is to insist that all foreign customers pay in your home currency and that your company pays for all imports in your home currency.

●      Leading and Lagging − If an importer (payment) expects that the currency it is due to pay will depreciate, it may attempt to delay payment. This may be achieved by agreement or by exceeding credit terms. If an exporter (receipt) expects that the currency it is due to receive will depreciate over the next three months, it may try to obtain payment immediately. This may be achieved by offering a discount for immediate payment. The problem lies in guessing which way the exchange rate will move.

●      Matching − If receipts and payments are in the same currency and are due at the same time, matching them against each other is a good policy. However, the only requirement is to deal with the forex markets for the unmatched portion of the total transactions. Also, setting up a foreign currency bank account is an extension of matching.

●      Doing Nothing − The theory suggests that long-term gains and losses gets hedged automatically. Short-term losses may be significant in such processes. Advantage is the savings in transaction costs.