Why currency volatility is now a core risk for international SMEs

On International SME Day, it’s worth recognising the transformation small and medium-sized enterprises (SMEs) have undergone in recent years. Previously, most small and medium-sized businesses (SMEs) kept things local and were largely unaffected by developments in global markets. However, these days, that's no longer the case. Now, more and more SMEs are going global, working with partners, suppliers, and customers all over the world. But with that global ambition comes new and often underestimated risks, chief among them: currency volatility.

Previously, exchange rate fluctuations were considered only a problem for multinational companies and financial giants. However, they now pose a real threat to the profitability of SMEs as well. This is particularly true in the current environment, where interest rate cycles, geopolitical instability, and protectionist trade policies are colliding in ways that amplify volatility across key emerging market currencies.

Recent trade data highlights have exposed the vulnerability of SMEs to FX volatility. In Spain, for instance, nearly half of exports and the majority of imports now take place outside the eurozone. This means that even relatively small shifts in foreign exchange rates can significantly alter the cost of goods sold, compress margins, and force difficult pricing decisions. In volatile conditions, a deal that initially appeared commercially viable can quickly become loss-making by the time payment is due.

The situation is further complicated by the geographic diversity of SME trading partners. From North Africa to Latin America and Asia, the currencies SMEs encounter are not only varied but subject to wildly different political and economic pressures. The Turkish lira, for example, continues to slide under the weight of high inflation and policy uncertainty, while the Moroccan dirham remains relatively stable but vulnerable to climate-related shocks and political tension. In China, the yuan has performed surprisingly well of late but faces downward pressure amid escalating tariff disputes and a faltering economic recovery.

Even the Brazilian real and the Mexican peso — often seen as relatively stable — are far from immune. Brazil’s looming electoral cycle could test investor confidence and currency stability, while Mexico faces trade-related risks and low growth, both of which could drive currency weakness in the year ahead.

More recently, the US dollar has seen notable depreciation in the last three months, while tensions in the Middle East have injected a fresh wave of volatility into global markets. These developments are a reminder of how rapidly currency conditions can shift — and that even historically stable currencies are not immune to the ripple effects of geopolitical uncertainty, reinforcing the need for dynamic, forward-looking FX strategies.

For SMEs, the lesson is clear: currency risk is no longer a peripheral concern. It is a central business issue that must be addressed with the same rigour as any other operational threat. That means implementing FX risk management strategies — not as a formality, but as a core part of planning, pricing, and financial forecasting. Ignoring this risk can undermine otherwise sound business decisions; managing it proactively can provide a competitive edge.

As global economic uncertainty persists and emerging markets remain integral to international supply chains, SMEs that take control of their FX exposure will be better positioned to weather shocks, protect margins, and seize opportunities when they arise. On International SME Day, that’s a message worth underlining.