You're at your company all-hands meeting. The CEO announces the launch in London or Tokyo. Everyone cheers for the new revenue stream. But you know the truth. Those projected millions rely on a delicate web of assumptions. While the sales team celebrates, you see the risks hiding in the spreadsheet rows. Currency volatility. Archaic local tax codes. Hidden operating costs that don't exist at home.
You aren't being paranoid. You're being practical. The market backs you up here. FX derivatives shot up 20% year-over-year in 2025 as teams scrambled to hedge against currency swings. It makes sense given that global trade forecasts dropped to a -0.2% contraction due to shifting tariffs.
In this article, we’ll cover how to model FX risk, taxes, and entity costs for your international push and show you how to facilitate urgency by setting it up in Runway. You'll gain the power to run complex expansion scenarios and handle cross-team planning without waiting on anyone else.
Why international expansion requires risk analysis
Getting international expansion right creates opportunity. Skip the prep, and costs pile up. Setting up an entity runs from $20,000 to $150,000 per country, with compliance and operating expenses on top. The bigger risk? Missing what you didn't plan for.
Currency swings show up three ways:
- Transaction risk: You can lose money while waiting on cross-border payments.
- Translation risk: This lands when you convert foreign statements to your home currency.
- Economic risk: Exchange rates move over time and impact cash flow and your competitive position.
Tax gets more complicated with every new country. Canada recently shortened transfer pricing documentation deadlines from three months to 30 days. More countries set global minimum tax rules in 2024, and more are rolling out this year. Penalties can hit you quickly if you miss a tax deadline or mess up transfer pricing.
Entity costs vary a lot by region. Labor in San Francisco costs more than Austin or Manila. On top of salary, payroll taxes, benefits, insurance, and overhead add 30-40%. Add rent, utilities, compliance, and local pro services. If you guess instead of model, you'll underestimate burn and overestimate runway.
Smart finance teams model all three:
- Track FX exposure by entity and by transaction type
- Build tax rules for each location into forecasts
- Calculate real costs per region, including each statutory requirement and overhead
Then, they run scenarios and see where assumptions break, before spending money.
Identifying the main drivers of FX risk
Exchange rates change with interest rates, growth prospects, politics, and trade balances. For finance teams, it means three key issues.
- Your revenue and spending in foreign currencies jump up or down when you convert back home. For example, if you bill in euros but report in dollars, a 10% fall in the euro slashes your revenue by 10% when you consolidate. Pay salaries in pounds but earn dollars, and a stronger pound raises your cost base.
- You face timing risk. The rate when you invoice isn't always the rate when you collect. The rate when you budget isn't the rate when you pay. Transaction fees and FX markups tack on another 1-3%. Each bank in the chain may take $15-$30 per payment.
- You need to choose your method for currency translation. Average rates smooth swings, but can mask month-to-month shifts. End-of-month rates show your position at month end, but might distort trends. This choice shapes your reporting and how investors judge your results.
You can manage exposure with smart hedging. Use forward contracts to lock rates. Currency swaps help with longer-term commitments. Multi-currency accounts let you keep funds in the original currency. Natural hedging means matching revenue and expenses in the same currency.
Start by modeling your exposure. Know which currencies you're long or short, when your cash actually moves, and how even a small swing hits your margin. Then hedge only the parts with the most risk.
Understanding global taxation challenges
Tax gets tangled fast across borders. Every country brings its own corporate tax rate, withholding requirements, VAT or GST rules, and unique deadlines. Miss one, and you'll pay penalties, interest, and maybe face an audit.
Most companies slip up on transfer pricing. Anytime you buy, sell, or license across entities, tax authorities want arm's-length pricing. That means showing your prices match what you'd pay or charge outsiders. Belgium and Austria just added new transfer pricing documentation rules, ramping up complexity.
The OECD's Base Erosion and Profit Shifting standards set a 15% global minimum tax. Pillar Two affects your entity setup and profit allocation. Countries like Indonesia, Ireland, and Denmark rolled out these rules in 2024 and 2025. If your tax rate falls below 15% in a country, expect to pay extra elsewhere.
Payroll taxes swing heavily by country. Social security, unemployment, workers' comp, and other legal charges can add 20-40%. Some regions mandate a 13th or 14th-month salary. Others require extra benefits or specific severance. You need to model these by country to avoid surprises.
Strong tax planning means:
- Forecasting taxable income by entity
- Applying local rates and rules
- Accounting for withholding on cross-border payments
- Tracking carryforwards, credits, and more
Model in these tax drivers from day one, not after the fact.
Calculating entity costs for overseas operations
Entity costs break into setup, ongoing compliance, and operations. Setting up runs $22,000 to $63,000 for legal, incorporation, VAT, banking, and tax structuring. Once is easy. Ongoing is not.
Ongoing compliance covers accounting, tax filings, audits, and regulatory reports. Expenses shift with complexity and size. You'll need local expertise for employment, privacy, or sector-specific rules. Annual upkeep can land between $10,000 to $50,000 per entity.
Operational spending includes rent, utilities, IT, insurance, and pro services. Labor eats the most, usually 60-80% of spend. But salary is just the start. Payroll taxes, insurance, and benefits tack on 30-40%. Then factor in HR, finance, legal, and exec costs.
Here's what you really need to watch:
- A senior engineer in San Francisco earns $150,000, but the real cost is $210,000 with everything included. Austin's the same job at $160,000. Manila's at $80,000. These differences add up across a global team.
- Hidden costs matter. Cross-border payment fees, FX conversion spreads, banking charges, plus onboarding and compliance work, all chip away at margins. Modern platforms often cut admin 30-40% by automating, but you still need to budget for them.
Build up your cost model before you commit:
- Break down labor by role and seniority
- Add statutory costs and benefits by location
- Layer in office, compliance, and admin expenses
- Compare fully loaded cost to revenue projections
This is how you know if the business case actually works.
How to model FX risk, taxes, and entity costs in Runway
Runway uses dimensional modeling so you can build one model with multiple entities, currencies, and tax regimes. Every transaction and employee gets a tag, by entity, region, and currency. You keep everything detailed and still see the big picture.
Connect your systems to start. Plug in your general ledger and HRIS so Runway pulls accounts, departments, employees, and currencies. Build your databases, aggregate and transform your data, and apply FX, tax, and cost drivers right where you need them.
Here's how to do it, step by step.
Step 1: configure organizational and dimensional structures
Start by defining your model's key dimensions. Runway uses dimensions to group your data, like department, region, subsidiary, and currency. Some dimensions pull right in from your integrations. QuickBooks or Xero give you GL Account Name, Class, Vendor. HRIS enriches with team, department, title, and office.
For international setups, add global dimensions like subsidiary and region. Use the dimensions manager to build these lists. Tag each subsidiary with its home currency and reporting entity. Tag each region (APAC, EMEA, Americas) so you can sort costs by geography.
Set up multi-entity integrations. Connect each GL account (US, UK, Singapore, etc). In your integration SQL, add a SELECT per entity, tag each row with subsidiary, and merge using UNION ALL.
For headcount, connect HRIS or build an employees database with start date, end date, base salary, department, role, and location. Now you can calculate active headcount for any entity or region, and roll up fully loaded costs.
Step 2: integrate FX rates and currency assumptions
Runway handles FX with a dedicated rates database.
Create a Google Sheet pulling live exchange rates from XE.com. Set up a named range like runway_xe_fx and connect it with the Google Sheets integration.
Write an SQL query to grab monthly average and end-of-month rates. Group daily rates by month and currency pair for AVG_AMOUNT and EOM_AMOUNT. Configure an FX rates database using FROM_CURRENCY and TO_CURRENCY as drivers.
Now apply FX to any foreign-entity database. Add a number driver like "amount in USD" and set a default formula referencing the original amount and the FX rate. Divide to convert foreign to USD: Amount [This Segment] / EOM_AMOUNT [GBP][USD]. Multiply if going from USD to something else.
Your rates update automatically as your Google Sheet syncs. Flip between average and end-of-month rates easily. View in local or consolidated currency, no manual conversions needed.
Step 3: model tax obligations and cross-border transactions
Model tax by first capturing statutory costs by location. In the Employees database, add columns for benefits % and payroll tax %. Rates differ, so create a lookup table, "Comp Cost Rates," driven by location. Add a lookup to each employee record to pull the right rate by country.
Calculate employer on-cost % as benefits % + payroll tax %. Compute loaded comp as prorated salary × (1 + employer on-cost %). You get your real labor costs, before overhead.
Allocate overhead next. Pool rent, IT, office ops, and other shared spend. Divide by active headcount for overhead per employee each month. Use a count() function filtered by start and end date to calculate who's active. Add this to loaded comp for a fully burdened monthly cost.
Our fully burdened labor rate guide digs deeper, including part-timers and contractors.
For intercompany eliminations, create a GL-account lookup. Map each account to an elimination type or "is intercompany" dimension. Flag accounts for intercompany revenue, expense, or balances. When you build your consolidated P&L, filter out rows flagged intercompany. Your consolidated results won’t double count internal moves.
Step 4: forecast entity costs and run scenarios
With your dimensions, FX, and cost drivers in place, build entity-level and consolidated forecasts. Start with a multi-level P&L hierarchy. Your base database pulls GL data, segmented by vendor, class, account, and subsidiary. Add columns for parent account and account type.
Create a lookup that maps GL accounts to reporting categories: revenue, COGS, sales & marketing, R&D, G&A. Use this to make a reporting category dimension. Then, aggregate up through each level for clear totals. Drill down from consolidated totals to single transactions as needed.
Combine your P&L with labor costs, segmented by department and location. Now you see each entity's revenue, expenses, and labor costs in one view. Apply FX translation so it all shows in your chosen currency.
Run scenarios. Model a best case with strong revenue and helpful FX rates, or, try out a scenario with slower deals and currency headwinds. Compare cash burn, runway, and breakeven across your scenarios. Runway’s dimensional models let you drill by entity, region, or department and see what matters most.
Use Runway's planning tools to work side-by-side with department heads. Invite regional leads to propose budgets. Finance reviews and adjusts, then consolidates into one plan. With real-time updates, everyone uses the same numbers and you see right away if local changes shift the global picture.
Go global, plane and simple
International expansion brings opportunity if you model the numbers right. You can manage currency volatility, complex tax rules, and detailed local costs if you account for them early.
Runway lets you pull it all together. Connect your systems, tag data by entity and currency, build FX and cost drivers, and run scenarios to confirm assumptions. You set up a financial model that scales with your team and keeps everyone in sync as you grow globally.
Ready to see it in action? Talk to our team and learn how to model international expansion in Runway.