Useful journalism to understand, manage and grow a business.
SearchA depreciation of the euro can make imported inputs more expensive and benefit some exports, but the effect depends on currencies, contracts, timing, and the ability to adjust prices. This guide offers a practical framework for identifying exposure and comparing scenarios without confusing them with a forecast.
When the euro depreciates against another currency, more euros are needed to buy that currency. If a company pays in dollars for a raw material, energy, goods, or a service, its cost expressed in euros may increase. At the same time, a company selling outside the euro area could become more competitive for some foreign customers, because the price in their currency may fall, or it could receive more euros from income invoiced in a foreign currency.
None of these outcomes is automatic. What matters is the invoicing currency—not just the customer’s or supplier’s country—the timing of payments and receipts, the terms of the contract, price developments, and the ability to pass cost changes on to customers. An SME that buys imported inputs and sells mainly in Spain may face cost pressures without directly benefiting from an improvement in export competitiveness.
The first step is to bring together purchases, sales, and outstanding commitments in foreign currencies. For each transaction, it is useful to record the currency, amount, expected payment or receipt date, and agreed terms. The inventory can include invoices, confirmed orders, and contracts, as well as recurring cash flows the company considers relevant.
Separating transactions by currency makes it possible to identify exposures that an aggregated total could conceal. It also helps distinguish amounts already fixed in a contract from future transactions whose prices could still change. The country of origin or destination is useful information, but it does not replace the invoicing currency: an international sale or purchase may be settled in euros or in a currency other than that of the counterparty’s country.
Direct exposure arises when a company has income, expenses, receivables, or payments denominated in a foreign currency. For example, if an SME in Spain has to pay an invoice in dollars, a depreciation of the euro against the dollar may increase the equivalent amount in euros, depending on the exchange rate applicable when the currency is converted or the transaction is settled.
Indirect exposure can arise even if the company invoices and pays in euros. A supplier in the euro area may use components, energy, or raw materials whose costs are linked to international markets or foreign currencies. Competitive pressure on a company selling to customers exposed to competitors from other countries may also change. The available sources describe these general mechanisms, but do not make it possible to determine how much of a cost change will be passed on by each supplier or sector.
With the inventory prepared, the company can compare how its amounts in euros would change under different exchange rates. For a purchase in a foreign currency, the basic calculation is:
Cost in euros = amount in foreign currency × exchange rate expressed in euros per unit of that currency.
The same logic applies to a sale invoiced in a foreign currency when estimating its equivalent in euros. It is important to use a clear convention and apply it consistently across all scenarios: if a quote is used that expresses how many units of foreign currency one euro buys, the calculation is different. The specific quote to apply will depend on the transaction and its terms; it should not be taken for granted.
Instead of presenting a single result as a forecast, the company can compare a baseline scenario with others using alternative exchange rates chosen to explore its sensitivity. There is no universal percentage that is appropriate for every SME. The exercise helps answer questions such as: Which upcoming payments would be most sensitive? What share of sales is invoiced in foreign currencies? What would happen to the margin if costs rose and sales prices did not change?
For each scenario, it is useful to review separately:
A weaker euro can make imports more expensive before a company can change its prices or adjust its purchases. On the export side, an improvement in competitiveness does not guarantee an immediate increase in sales either: demand, contracts, and customer responses all play a role. That is why it is useful to keep the purely exchange-rate effect separate from any assumptions about quantities sold or purchased.
Contracts can determine when a price is set and who bears exchange-rate fluctuations. It also matters whether a customer accepts a price review, whether validity periods apply, or whether the company has to maintain an offer for a specified period. Reviewing these terms makes it possible to identify which amounts are relatively predictable and which could change before they are received or paid.
The ability to pass on a cost increase should not be taken for granted. A price increase can affect demand or competitiveness, while not passing on the cost can reduce the margin. For overseas sales, the company may also decide to keep the price in euros, adjust the price in the customer’s currency, or review other commercial terms; each option has different effects and depends on the market and the contract.
| Element | Question to answer |
|---|---|
| Cash flow | Is it a purchase, a sale, or an outstanding commitment? |
| Currency and amount | In which currency is it invoiced, and what is the contractual amount? |
| Date | When is the price set, and when is payment or receipt expected? |
| Exchange rate | Which quote is used, and how is it expressed? |
| Scenarios | How does the equivalent in euros change under the assumptions being compared? |
| Margin | What happens if the sales price stays the same or is adjusted? |
| Terms | Does the contract allow prices or terms to be changed? |
This framework is a sensitivity analysis tool, not an exchange-rate forecast or personalized recommendation. The result for an SME in Spain or another country in the European Union will depend on its invoicing currencies, cost structure, markets, contracts, and timing. In addition, simplified calculations do not, by themselves, include all conversion costs, banking terms, tax effects, or possible hedging instruments.
The available sources support the general mechanisms—higher costs for certain imports and a possible improvement in the competitiveness of some exports—but do not provide a complete method for selecting or entering into financial hedges. The analysis can therefore help identify exposure and compare scenarios, without replacing a review of contracts or the advice required for a specific financial decision.
Three weeks before the polls, accountability for security failures and Hamas’s continued presence in Gaza are at the center of the debate over the prime minister’s leadership.
Read story
The monthly increase was driven by a bigger rise in imports, which reached a record. However, the deficit accumulated from January through August was 19.9% lower than in the same period of 2025.
Read story
Effective coordination is not about accumulating documents: it requires identifying who has each obligation, sharing specific risks, and adjusting work when site conditions change.
Read story