In a normal situation, if there is a currency fluctuation that does not go in the favour of the Australian business (which in this case would be a depreciation of the Australian dollar), the Australian business could be at risk, provided it is using the AUD to complete a transaction/multiple transactions between itself and the foreign business. In such a case, the Australian business would have to pay more AUD to retain its ability to purchase/gain access to the same goods/services from the foreign business, causing financial losses to the Australian business due to the depreciation of the AUD.
With natural hedging, an Australian business and its foreign counterpart can instead agree to deal with each other using a foreign currency to both countries that is typically less susceptible to fluctuations, i.e. a more stable currency, the US dollar being a good example of such a currency, in order to address the issue, i.e. mitigating the risk. For example, if an Australian business is selling goods to a Japanese business and is paid in USD, it will not matter if there is a subsequent depreciation of the AUD since the Australian business was paid in the more stable USD. This means that, should the Australian business wish to exchange the payment it receives in USD to its local currency (i.e. the AUD), it will receive an appropriate sum of money in AUD to make up for the depreciation, whereas if the Australian business was initially paid in AUD, then the Australian business will have obtained a lower amount of a less valuable currency.
I don't think your knowledge of natural hedging needs to extend beyond what is included in the syllabus as well as the textbook's explanation of this concept. Knowing and being able to express the fact that a
rranging for import payments and export receipts denominated in the same foreign currency reduces the financial risks associated with changing exchange rates will likely be sufficient.
I hope this helps!
