As a founder, your fiduciary duty is to manage capital with the utmost efficiency. In an investor’s eyes, leaving your equity portfolio unhedged against market volatility is a failure of risk management. Yet, countless Singaporean founders do exactly that with their company’s operational capital every time they travel for business. By relying on standard bank cards for international expenses, they are exposing their profits to the full force of FX volatility and value-destroying fees—an unhedged risk that has a direct, negative impact on their company’s valuation.
The SGD/USD currency pair, for instance, has shown significant volatility, with intra-year swings of 3–5% being common, directly exposing businesses paying in USD with SGD. While the Monetary Authority of Singapore operates a managed float regime for the Singapore dollar, allowing the trade-weighted exchange rate to fluctuate within a policy band, this systemic exposure is a level of unpredictable cost no serious operator should accept.
The Founder’s Blind Spot: Quantifying Operational Fx Risk
Your most important duty as a founder is to ensure capital is used in the most productive way.. Yet, many Singaporean founders leave operational cash flow exposed to unhedged FX risk when transacting overseas, which creates significant financial leaks and drags down company valuation.
The first is Volatility Risk. Currencies fluctuate daily, but few founders track the real impact of these movements on their non-local expenses. For example, the SGD/USD pair has demonstrated intra-year swings of 3–5%, directly impacting the actual SGD cost of recurring USD expenses like software subscriptions or cloud services. These unpredictable costs make financial forecasting and budgeting unreliable, translating directly into P&L volatility—a red flag for any serious investor.
The second is slippage or execution cost. This is the guaranteed loss incurred with every international transaction, hidden within the bank’s or card provider’s FX spread and transaction fees. This hidden cost acts like a trading commission on your operational budget, causing a guaranteed loss on every transaction. Financial industry analysis estimates that SMEs can lose up to 5% of their annual revenue on these hidden fees and poor exchange rates. For an investor-minded founder, a 5% hit to revenue is a direct and massive reduction in EBITDA and, by extension, the business’s valuation. Accepting this volatility and slippage is a failure of risk management.
The Yield Drag: Calculating The True Cost Of Unhedged Expenses
The combined forces of volatility risk and slippage create a substantial financial headwind for any growth-focused business—what we can accurately term the yield drag. For the analytical founder, this is not merely an overhead; it’s a direct erosion of EBITDA and, therefore, a permanent reduction in enterprise value.
Consider a conservative estimate for a Singaporean business with an annual non-local operational budget of S$50,000, split between USD for software and EUR for travel. If you rely on a standard bank card, every transaction involves a hidden retail FX spread and transaction fee—the slippage—which can easily total 3–5% per payment. On a S$50,000 budget, this guaranteed loss alone amounts to a minimum of S$1,500 per year.
Crucially, this figure doesn’t even account for the volatility risk. If the SGD weakens by just 3% against the USD over a budgeting quarter—a common intra-year swing for the SGD/USD pair—the effective cost of every USD expense is immediately 3% higher. This means that an item priced at US$1,000 could cost you S$40 to S$50 more, depending on the day you pay, with no corresponding increase in service or value.
Aggregating the 3% slippage and 3–5% volatility risk, the yield drag on unhedged expenses is 5–8% of the budget. Accepting this consistent drag on cash flow demonstrates a lack of financial rigour.
The Hedging Instrument: How A Multi-Currency Platform Mitigates Risk
Smart financial operators don’t just endure risk; they manage and price it. A multi-currency account is not simply a spending tool; it should be viewed as a bespoke hedging instrument for your operational capital. The core function is to allow the business to take a “long position” in the foreign currencies it regularly needs, insulating day-to-day transactions from the damaging effects of spot market volatility.
By opening and funding balances in major currencies like USD, EUR, or CNH within a dedicated account, you effectively decouple your operational cash flow from the constant flux of the SGD exchange rate. This action secures your rate when you move money into that currency and provides absolute cost certainty for all future expenses denominated in that foreign currency. You’ve created a natural, systematic hedge for your regular business spending.
The attached multi-currency virtual card then acts as the execution tool for this strategy, allowing you to spend directly from these pre-funded foreign currency positions with zero slippage (no transaction fees) at the point of sale. This simple shift moves currency management from a reactive, cost-incurring activity to a proactive, risk-mitigating strategy. It allows founders to achieve predictable financial forecasting and eliminate the systemic yield drag of unhedged international spending, fundamentally strengthening the business’s financial foundation.
From Risk Mitigation To Alpha Generation
Top-quartile companies actively manage operational risks like currency exposure as a source of competitive advantage, not just as a defensive measure. Eliminating the 5–8% yield drag from slippage and volatility directly increases profit margin and demonstrates financial stability, driving higher business valuation and operational alpha.
As per a Mckinsey report, most businesses, however, seem to manage only the most visible risks, such as exposure from a large transaction in a developing nation, which can be hedged with a financial instrument. The more insidious risk is constant if unhedged. However, for businesses, there is a far easier solution in the form of a multi-currency account benefit.
Conclusion:
You wouldn’t accept a 7% annual management fee on your investment portfolio. Why, then, are you accepting a similar performance drag on your most valuable asset? By treating operational currency exposure with the same rigour as portfolio risk, Singaporean founders can protect their capital, enhance their margins, and build a fundamentally more valuable and resilient business. Stop travelling unhedged to unlock and tap the unexplored potential of your business’s growth in absolute profit terms and realign your resources to scale-up.
