Why do companies use hedging in international trade?

Companies use hedging in international trade to manage and mitigate financial risks associated with currency fluctuations, interest rate changes, and commodity price volatility. By employing various hedging strategies, such as futures contracts, options, or swaps, businesses can stabilize cash flows, protect profit margins, and enhance budget predictability. This risk management approach helps companies maintain competitiveness in global markets and ensures they can meet financial obligations despite adverse market conditions. Ultimately, hedging supports more informed decision-making and fosters long-term growth.