TECHNOLOGY FOCUS Operations & efficiency
MITIGATING THE ‘FX’ OF CURRENCY VOLATILITY
Eliot Bassett, Managing Director at Lumon Pay, Corporate Division, a foreign exchange and currency risk management service provider, says manufacturers who take a pre-emptive approach to currency volatility will reduce their economic risk when it comes to foreign exchange
T
he conflict in the Middle East is the latest in a long line of geopolitical events to have serious ramifications for the UK’s manufacturing sector
and it’s supply chains. The current climate is hitting manufacturing businesses hard and causing financial implications that simply can’t be ignored. And it’s becoming increasingly clear that the uncertain economic landscape we find ourselves in isn’t going to change anytime soon. Therefore, it’s vital that manufacturing businesses recognise, sooner rather later, the critical role foreign exchange (FX) resilience plays within the industry.
The challenges facing the industry The Manufacturing Pulse Survey 2025 revealed that 31% of manufacturing professionals struggled to manage overall supply chain resilience amid geopolitical and macroeconomic shifts in 2025. 33% said regulatory changes, such as US tariffs, was their biggest obstacle. These risks are expected to continue into the second half of this year and beyond.
Alongside this is currency volatility, one of the biggest challenges hitting British manufacturing at the moment. Short term currency instability is driving up insurance premiums, as well as shipping costs, creating operational and logistical nightmares. Profits margins across the manufacturing industry are being severely affected and for those reliant on imported goods, the risk is even higher.
Shortages in raw materials, rising costs of essential packaging materials and increased energy prices are all having a significant effect.
26 July/Automation 2026 | Automation
Even those who don’t import directly are being affected, as costs are passed down the supply chain. The strength of the US dollar (USD) is also playing a huge part, due to the country’s deep- rooted influence on global markets and its connection to commodity pricing. The pricing mechanism for many critical raw materials is also linked to the USD, and as currencies are shifting so quickly and so violently, an understanding and continuous management of USD strength is a necessity.
What all of this clearly shows is that, now
more than ever, manufacturers should protect themselves from FX risk.
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By putting more formal frameworks and policies in place, businesses can help to manage their FX risk
making conscious decisions to embed risk management into everyday decision making. By putting more formal frameworks and policies in place, businesses can help to manage their FX risk. These strategies include currency hedging which allows companies to secure an exchange rate ahead of a contract being signed or agreed. This allows the value of a future payment to be protected against market movements. This is particularly important considering the fluctuating USD and how it has affected markets and pricing in recent months Manufacturers can go further to protect themselves by outsourcing to expert FX risk management services. By doing so, they can adopt practices used by larger businesses and stay ahead of the game when it comes to the effects of geopolitical uncertainty.
Manufacturing is coming back stronger Manufacturers must look to the future to protect their businesses and their bottom lines. They must plan ahead and treat FX risk as a permanent fixture within their operation. By being proactive and treating FX exposure as a feature of the sector rather than just an infrequent interruption, business leaders can be better prepared to foresee and manage the effects of currency volatility. Already, we are starting to see the industry adapting and rising to meet these challenges. Small and medium sized businesses are
”
Lowering risk With a pre-emptive approach, alongside considered strategies and strong structure, manufacturers can anticipate potential currency volatility and, ultimately, lower the risks they face when it comes to FX. While we can’t predict what’s around the corner, especially when it comes to the geopolitical climate, by reshaping the way they look at FX risk, manufacturing businesses can build resilience, experience growth and develop economic stability for the future. Learn more about Lumon’s foreign exchange and currency risk management service, and explore the possibilities available to you via the website.
Lumon Pay
www.lumonpay.com/corporate/
automationmagazine.co.uk
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