Canadian FX Risk Policy Template

Written by Omer Bozdag, Founder.

A written FX policy tells everyone in the business what currency risk you are willing to carry, who can act on it and how results are reviewed. Use this template as a starting point, replace every bracketed placeholder with your own decisions, and have it approved by your leadership or board. It is general information, not advice.

Approval roles

Policy owner: [CFO or Controller], responsible for maintaining the policy.
Approver: [CEO, owner or board], approves the policy and any exceptions.
Execution: [named individuals] may request quotes and book trades within the limits below.
Review: [external accountant or finance committee] reviews results at the set cadence.

Exposure register fields

Exposure ID and description (supplier, customer or contract).
Currency and direction (payable or receivable).
Foreign amount and expected payment or receipt date.
Certainty level: committed, forecast or indicative.
Budget rate, current rate and amount hedged to date.
Hedge instrument, trade reference and maturity.

Budget-rate process

Set a budget rate for each currency at the start of the [fiscal year or quarter]. Record the source and date of the rate (for example the Bank of Canada daily rate on a fixed date). Review the budget rate [quarterly] and document any change and the reason for it.

Permitted tools

Spot transactions for immediate needs.
Forward contracts to fix a rate for a known future date.
Limit orders to target a rate without watching the market.
Instruments not listed here (for example options) require written approval from [approver].
Speculative trades unrelated to an underlying business exposure are not permitted.

Hedge-ratio ranges (editable placeholders)

These are placeholders, not recommendations. Committed exposures within [0 to 3] months: hedge [__]% to [__]%. Forecast exposures [3 to 6] months out: hedge [__]% to [__]%. Forecast exposures [6 to 12] months out: hedge [__]% to [__]%. Choose ranges that reflect your margins, pricing power and cash flow tolerance.

Review cadence

Exposure register updated [weekly or monthly].
Hedge coverage against policy ranges reviewed [monthly].
Policy reviewed in full [annually] or after a material change in the business.

Worked illustrative example

Illustrative only. A Toronto importer expects to pay USD 100,000 to a supplier in four months. Its budget rate is 1.35 CAD per USD and the policy says hedge 50% to 75% of committed exposures in the 3 to 6 month bucket. The controller books a forward contract for USD 60,000 (60%). If USD/CAD later rises, only the unhedged USD 40,000 is exposed. If it falls, the hedged portion does not benefit. The figures are hypothetical and are not a forecast or quote.

Frequently asked questions

Do small businesses need a written FX policy?

Any business with regular foreign-currency payments or receipts can benefit from writing down who decides, what is hedged and how results are reviewed. The template can be as short as one page.

Is this template financial advice?

No. It is general information. The hedge ranges are placeholders that your business needs to set based on its own circumstances.

Sources

CurrencyMate educational content is written or reviewed by Omer Bozdag. It is general information, not personalised financial advice. We cite primary sources where claims are made and update pages when facts change.