Over the past two years, the USD/VND exchange rate has experienced significant fluctuations — with volatility reaching over 5–7% at times. From early 2023 to mid-2024, for instance, the rate rose from approximately 23,500 to more than 25,400 VND per USD — a nearly 8% increase in less than 18 months. For exporting businesses, this can mean increased revenue in USD, but potentially shrinking profits in VND if exchange rate risks are not well managed.

For small and medium-sized enterprises (SMEs), the situation is even more critical. Unlike large corporations equipped with specialized finance teams and sophisticated hedging instruments, most SMEs lack such capabilities. Many only realize the impact of exchange rates when they see rising sales but declining profits. Currency risk, if left unmanaged, can silently erode business success.

So, what can SMEs do to protect themselves? Below are three simple and accessible strategies that any SME can consider implementing to proactively control exchange rate risks.

1. Smart Cash Flow Planning

One of the most common mistakes SMEs make is letting their cash flows be dictated entirely by market exchange rates. In reality, with proper planning, businesses can significantly mitigate currency risk.

Take an example: if your export contract is paid in USD, you can estimate when you’ll receive the payment and plan when to convert it into VND. This allows for more accurate cash flow forecasting and gives you time to simulate different exchange rate scenarios and prepare accordingly.

You can also isolate parts of your revenue that are sensitive to exchange rate fluctuations — such as pending USD payments — and manage them separately. Furthermore, you can negotiate payment schedules with your clients to avoid periods of high volatility, such as the end of fiscal quarters or around major economic announcements like interest rate hikes by the Federal Reserve.

Using a monthly cash flow forecast table in combination with publicly available exchange rate forecasts (from banks or financial tools) can help you model worst-case scenarios — for example, a sudden 3–5% exchange rate increase — and build backup plans proactively.

2. Hedging with Forward Contracts

Forward contracts, once seen as tools for large corporates, are now increasingly accessible to SMEs. A forward contract allows you to lock in an exchange rate for a future transaction, regardless of future market fluctuations.

For instance, if you have a $100,000 export contract with payment due in 60 days, you can work with a bank to set a fixed exchange rate today. When the payment arrives, you convert the amount at the agreed rate — no surprises, no losses due to unexpected shifts.

The benefits are clear: you eliminate uncertainty and can build more accurate financial plans. Forward contracts usually involve minimal transaction fees and are now offered by major Vietnamese banks such as Vietcombank and BIDV, or by specialized financial service providers — even for smaller companies.

Forward contracts are especially useful in situations like:

Export contracts with large values or payment terms exceeding 30 days.

Importing raw materials in foreign currencies and needing to manage input costs.

Failing to use this tool can lead to major losses. For example, if the exchange rate increases by 5% over 45 days, you could lose 5% of your profit even if everything else goes according to plan.

3. Flexible Negotiation of Payment Terms

An often overlooked but highly effective strategy — especially for SMEs with good negotiation leverage — is managing currency risk right at the contract negotiation stage.

Instead of passively accepting the buyer’s preferred currency, businesses can proactively propose using more stable currencies like USD, avoiding volatile currencies such as KRW, JPY, or emerging market currencies.

Additionally, rather than receiving a lump-sum payment, consider splitting it into multiple installments. This helps spread the risk across different time periods and offers more flexibility in choosing favorable conversion times.

Another smart move is to negotiate exchange rate adjustment clauses — for example, stating that the contract terms will be adjusted if the rate fluctuates beyond a certain threshold (e.g., ±3%). This kind of clause not only protects your bottom line but also shows partners that you understand global risks and are committed to long-term success.

SMEs often have the advantage of being agile — something large corporations can’t always match. For instance, a small Vietnamese SME successfully persuaded their EU partner to switch from EUR to USD payments, making it easier for them to manage conversions thanks to better tools and monitoring systems available for USD/VND.

4. Quick Comparison of the 3 Strategies

Exchange rate risk is a silent threat in global trade — and for SMEs without dedicated finance departments, proactively managing this risk is essential to preserving profit margins.

The three solutions above are cost-effective and don’t require complicated systems, yet can make a significant difference if applied correctly. In a world where global economic trends shift unpredictably — influenced by interest rate changes, geopolitical tensions, and commodity prices — managing currency exposure isn’t a luxury, it’s a necessity.