When we talk about risk management in exports to Asia, we are far from just dealing with exchange rate volatility. Exporting to this market involves challenges that directly influence the financial results of Brazilian exporters. 

Throughout this content, you will understand: 

• Why risk management is essential when exporting to Asia; 
• What are the main challenges impacting your operations? 
• How currency hedging works in practice; 
• The common mistakes that can jeopardize your profitability and how to avoid them;
• And how to use market intelligence to make more strategic decisions. 

Happy reading! 

Read also: 

• Risk management in volatile times: expectations for 2025 

Why is risk management so critical when exporting to Asia? 

Exporting to Asian countries means trading in different currencies, such as the yen, yuan or rupee. What’s more, the scenarios are often far apart not only geographically, but also in terms of exchange rate policies and economic stability. 

In addition, many contracts are closed with long terms, exposing the exporter to exchange rate fluctuations between closing the deal and receiving payment. Therefore, without an effective risk management policy, even a profitable operation can end up making a loss – even with sales prices higher than costs. 

Read also: 

• Understand monetary policies and the weight of Asian rates on the foreign exchange market 

What are the main challenges in exporting to Asia? 

Effective risk management begins with mapping the factors that affect the operation. When exporting to Asian countries, the common challenges include: 

1) Exchange rate 

The obvious risk. Any fluctuation in the dollar against the real has a direct impact on profitability. Even when the contract is in dollars, the company runs a risk if it doesn’t use a hedge. 

2) Local currencies 

Some markets require or offer the possibility of trading in local currency (such as the Indian rupee, yuan, won or yen). In this case, the exporter takes on an additional risk: the variation of the Asian currency against the dollar. 

For example, a company that exports to India and is paid in rupees (INR) needs to track both INR/USD and USD/BRL. Therefore, a devaluation of the rupee against the dollar reduces the final value in reais.

3) Geopolitical

Tensions between China and the US, the conflict in the South China Sea, instability in Taiwan or even internal problems in countries like Myanmar and Pakistan can have direct and indirect impacts. Some of these are: logistical delays, changes in routes and even abrupt fluctuations in local currencies. 

Read also: 

• Trump’s tariffs: what are the impacts on the global agricultural market? 

4) Logistics 

Asia is home to some of the busiest ports in the world (Shanghai, Singapore, Busan). This generates risks such as: 

• Congestion;
• Shortage of containers;
• Increased international freight costs. 

These bottlenecks became evident during the pandemic and continue to recur, especially during periods of high demand or in conflict situations. 

5) Regulatory and phytosanitary

Changes in sanitary and phytosanitary requirements are a constant. A real example was Vietnam, which in 2023 insured shipments of Brazilian corn after changing phytosanitary certification requirements. This came as a surprise to exporters who were not monitoring these risks properly. 

What impact does exchange rate volatility have on exports? 

The exchange rate plays a central role in shaping the price and margin of exports. When the real appreciates, Brazilian products lose competitiveness. On the other hand, a devaluation of the real can generate occasional gains, but it also brings instability and risk to future contracts. 

The case of the coffee sector illustrates this dynamic well. Trading companies usually negotiate contracts in dollars, but bear operating costs in reais. A sudden appreciation of the Brazilian currency carries the risk of eroding the expected margin, which has repercussions on the profitability of the operation. 

Foreign exchange risk management is based on the use of financial instruments that allow exporters to reduce their exposure to market fluctuations. Among the main ones are: 

• Forward contracts (forwards): fix a future exchange rate, providing predictability as to how much the company will receive in Reais on the day of payment;
• NDFs (Non-Deliverable Forwards): used when the local currency is not convertible, such as rupee, won or yuan. Allows the exporter to hedge the conversion of the Asian currency to dollars;
• Put options: these offer protection against the appreciation of the Real, while at the same time making it possible to take advantage of favorable movements;
• Combined structures: mix terms and options, seeking a balance between protection and cost according to the company’s needs. 

Imagine a trading company that ships sugar to China every quarter. This company could contract an NDF with maturity in line with the customer’s payment deadline. This way, there is greater predictability about the amount it will receive in reais, with no nasty surprises along the way. 

Read also: 

• Understand what currency hedging is and how it works 

Is there such a thing as a natural hedge? 

Yes, but it’s partial. If your company has significant costs in dollars (international freight, equipment leasing or the purchase of imported inputs), part of the exchange rate risk is naturally offset. 

However, in most cases, natural hedging is not enough to eliminate the risk. This is especially true when most of the costs are in Brazilian reais and the revenues are in dollars or Asian currencies. 

The 5 common mistakes in risk management 

Many exporters still make basic mistakes in risk management, which can jeopardize profitability and even make the operation unviable. Here are the main ones: 

1. Not hedging: relying on the “luck” of the exchange rate is a classic mistake;
2. Maturity mismatch: taking out a hedge for a maturity that differs from the actual date of the flow;
3. Signing complex instruments without understanding: like exotic options, this entails possible unexpected losses;
4. Ignoring local currencies: when the contract is in rupee, yuan or yen, there are additional risks beyond the dollar;
5. Underestimating regulatory and logistical risks: customs barriers, certifications, and bottlenecks can generate hidden costs. 

These factors must be monitored and managed. Otherwise, they can erode as much as an exchange rate variation. 

Read also: 

• The importance of hedge diversification in the commodities market 

Hedgepoint HUB: risk management is survival 

The Asian market offers huge opportunities, but it doesn’t forgive amateurs. Exporting without a hedge is, in practice, a bet on the financial market, not a responsible business decision.  

Furthermore, ignoring risks such as logistics, local currencies and geopolitics means giving up control over your operation. Companies that regularly export to Asia cannot rely solely on exchange rate forecasts. They need to implement them: 

• Daily currency monitoring (including local currencies);
• Monitoring the geopolitical and regulatory landscape;
• Constant reading of logistical risk analyses. 

At Hedgepoint HUB, you’ll find exchange rate analyses, geopolitical scenarios, logistics trends and expert insights to make safer decisions when exporting to Asia. 

Access now and turn information into strategy. 

Read also: 

• How does Hedgepoint operate in the Asian commodities market? 

——————————————————————————————————————

This document has been prepared by Hedgepoint Global Markets LLC and its affiliates (“HPGM”) solely for informational and instructional purposes and is not intended to establish obligations or commitments to third parties, nor is it intended to promote an offer, or the solicitation of an offer, to buy or sell any securities, futures, options, currencies and swaps or investment products. Hedgepoint Commodities LLC (“HPC”), a wholly owned entity of HPGM, is an Introducing Broker and a registered member of the National Futures Association. Trading futures, options, currencies and swaps involves significant risk of loss and may not be suitable for all investors. Past performance is not necessarily indicative of future results. Hedgepoint clients should rely on their own independent judgment and that of external advisors before entering into any transaction that is introduced by the company. HPGM and its associates expressly disclaim any liability for any use of the information contained herein that results directly or indirectly in damages of any kind. In the event of questions not resolved by our customer service team (client.services@hedgepointglobal.com), please contact our internal ombudsman channel (ombudsman@hedgepointglobal.com ) or 0800-878 8408/ouvidoria@hedgepointglobal.com (for customers in Brazil only).