What does offsetting mean?
Offsetting means countering or compensating for the effect of something else. It is used whenever a gain, cost, risk, disadvantage, or other influence is balanced by a corresponding change, as when lower production costs offset falling sales or when stronger sales offsetting rising expenses. The word is especially common in business, economics, finance, and policy discussions, where it often describes one factor reducing the overall effect of another. In financial contexts, offsetting can also refer specifically to taking an opposite position in order to reduce exposure to a risk. The term is precise and neutral, suggesting a counterbalancing relationship rather than the complete disappearance of a problem.
verbTo compensate for or balance one effect against another, especially by making a corresponding adjustment. In business and finance, it is also used to mean to hedge a position or risk.
- To compensate for or cancel the effect of something.
- To balance a financial position by taking an opposing position.
"Higher energy costs were partly offsetting by increased efficiency across the production process."
"The rise in sales was offsetting a decline in customer support costs."
"The company offsetting its currency exposure by purchasing forward contracts."
In finance, offsetting can mean reducing exposure to one risk by taking an opposite position, turning a potential problem into a hedge.
Reviewed by Deb Chak, Editor. AI-assisted content curated by RJS Tech Solutions LLP.
Where does offsetting come from?
The verb offset is formed from the English words off and set, in the sense of setting one amount against another to balance it. It developed in the early 16th century, originally in the context of accounting and the balancing of books. The modern financial sense follows this older idea of counterbalancing a value or risk. The form offsetting is the present participle and gerund of that verb.
Related word forms
How offsetting is actually used
The form is commonly used in business, finance, economics, and general technical writing. It is a present-participle and gerund form of the verb offset and can modify a noun, as in an offsetting effect, or describe an ongoing action.