ISA 570: how do you prove your currency risk is under control?

In conversations with treasurers we hear the same question more and more often: “What does ISA 570 (Revised 2024) mean for our FX risk reporting?” The short answer: more than most expect. The revised standard applies to periods beginning on or after 15 December 2026. It extends the assessment horizon. For FX risk, in our view, that means traceable evidence, down to the documented source of the market data used.

The wrong question

Many companies first ask: “Do we need to change our hedging strategy?” Understandable, but not decisive. The question that makes the difference is: how do you show that currency risk is measured in a structured and continuous way, rather than handled case by case when a problem appears? The difference looks subtle. It is what separates companies that walk into the auditor conversation prepared from those that do not.

What ISA 570 actually requires

The standard does not prescribe specific software or a single methodology. It asks for something more demanding: that management can explain, document and justify its assessments wherever currency risk can affect going concern. In practice that means being able to answer questions like these with data:

• How is the currency exposure calculated?
• How often is it updated?
• Which scenarios are analysed, and on which assumptions?
• How is the impact of an exchange-rate move on margins and liquidity estimated?
• Is there a shared methodology, or is each decision taken case by case?

One risk, four faces

A common mistake is to treat currency risk as a single phenomenon. Exchange-rate moves create four types of risk that arise at different moments and call for different approaches.

• Competitive risk starts with the rates used for budgets and price lists. A competitor operating with a weaker currency can offer prices you cannot match. Often the problem only becomes visible when an order fails to arrive.
• Economic risk arises even before the order, simply because the company may receive it. This is where much of the unmanaged risk sits: commercial decisions still rest on rate assumptions the market has already left behind.
• With the invoice, economic risk becomes transaction risk. The exposure is now certain. If risk management only starts here, the hedge often comes too late to really protect the margin.
• Translation risk follows a different logic. It comes from the periodic revaluation of foreign-currency assets and liabilities. It creates no immediate cash flow but can change the balance sheet significantly. Because hedging it means long horizons and high costs, many companies only manage it when market conditions make it worthwhile.

The prudence principle is clear: each exposure should be hedged in line with the probability that it materialises. Not every exposure deserves the same treatment, and the ability to distinguish between these levels protects the operating margin more than the number of active hedges.

The problem of scattered documentation

In most companies this information already exists. It is just scattered: an Excel file updated when there is time, a bank report, a quarterly analysis and the treasurer’s experience, valuable but rarely written down. The data is correct, but spread across tools and hard to reconstruct consistently when an auditor wants to understand how certain decisions were made.

What changes with ISA 570

This is the most important change. Having the data is no longer enough. The company has to show that the data actually guided management’s decisions rather than simply being filed. That is not just a technical change; it concerns how a company organises, documents and governs its decisions. The best prepared will therefore not be the companies with the most hedges, but those that know their exposure, monitor it over time and decide on an objective basis.

How to prepare

2026 is the preparation year. We do not try to predict markets. We help companies measure currency risk independently, continuously and in a documented way, turning scattered data into information that CFOs, treasurers, boards and auditors can work with.