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FX Hedging Strategy: What the UBS $100m Loss Tells Us About Risk Management

Introduction

FX hedging strategy is under renewed scrutiny after UBS reported a $100 million loss from a forex miscommunication in Q2 2024. This wasn’t a speculative loss—it was a systems and oversight failure that highlights how operational lapses, not just market moves, can trigger material damage during periods of currency volatility.

As FX markets remain unpredictable—driven by central bank divergence, geopolitical tension, and macroeconomic noise—this incident is a timely reminder that risk isn’t always visible on a Bloomberg terminal. It can live in your controls, your policies, and your assumptions.

When Internal Breakdowns Cause External Losses

The UBS loss stemmed from a hedging misalignment between trading desks. The error wasn’t about taking a risky position—it was about poor communication and fragmented responsibility. In volatile markets, coordination matters more than ever. And when it breaks down, losses compound quickly.

Why Corporates Should Pay Attention

While this may appear to be a bank-specific story, the implications are directly relevant to corporates managing foreign exchange exposure. At Vedanta Hedging, we regularly see firms operating under legacy treasury policies that restrict responsiveness just when it’s most needed.

“It is difficult for corporates to react in an agile way if they have an inflexible hedging policy.”
– Abhishek Sachdev, CEO, Vedanta Hedging (via Risk.net)

We highlighted this very theme in our recent analysis of FX hedging strategy, just ahead of Trump’s “Liberation Day” speech. As we warned then, dollar volatility and political risk demand more flexible, data-led hedging approaches—not rigid frameworks. The UBS case underscores what can happen when operational execution fails to keep pace with market risk.

Quoted in the Financial Times

The Financial Times’ Lex column featured commentary from Vedanta Hedging on this very topic. As we noted in the piece, systems risk, control gaps, and unclear accountability aren’t just operational issues—they’re strategic exposures in volatile FX markets. In that context, hedging isn’t a box-ticking exercise. It’s risk management at the sharp edge. Read the full FT Lex article (PDF).

Practical Questions for Treasurers

Is your FX hedging strategy agile enough to adapt intra-quarter?
Are you benchmarking spreads and execution timing in live markets?
Have you pressure-tested your operational handoffs and internal approvals?

The UBS case wasn’t about rogue risk-taking. It was about gaps in process. For corporates, it’s a call to examine your policy’s real-world resilience—not just your theoretical exposure.

How We Help

At Vedanta Hedging, we work with clients to align risk policy with market reality—blending governance discipline with execution flexibility. Whether you’re managing FX forwards, swaps, or interest rate caps, our role is to make sure your strategy works when it matters most.