A business with a foreign receivable, an investor holding foreign equities and a borrower with foreign-currency debt all face the same problem: the underlying can perform exactly as expected and still lose money on translation. Hedging separates the two decisions.
The standard tools are an outright-forward for a known amount on a known date, an fx-swap for rolling a hedge forward, and a currency-option where the exposure is contingent. The cost is not the hedge itself but the forward-points, which reflect the interest-rate-differential and can be a meaningful drag or a small pickup depending on direction.
Hedge ratios are a choice. Fully hedging a foreign equity portfolio removes currency risk but also removes the diversification that foreign currency can provide when domestic assets fall.
Example: a European firm expecting $2m in six months sells the dollars forward at 1.0900 against a spot of 1.0840. It locks in EUR 1,834,862 and gives up any gain if the dollar strengthens.
Related: outright-forward, fx-swap, currency-option, forward-points