1. Hedging: Companies can use financial instruments such as forward contracts, futures, options, and swaps to hedge against currency fluctuations. These instruments lock in exchange rates for future transactions, providing certainty and reducing the risk of adverse movements.
2. Natural Hedging: This involves structuring operations in a way that offsets currency exposures. For instance, a company can match its foreign currency revenues with expenses in the same currency, thereby reducing the net exposure.
3. Diversification: By diversifying their operations and revenue streams across multiple currencies, businesses can mitigate the impact of any single currency's fluctuation.
4. Currency Clauses: Including currency clauses in contracts can protect businesses from adverse currency movements. For example, a company can agree to adjust prices based on exchange rate changes, ensuring that both parties share the currency risk.