'Early Warning System' for Euro Break-up Scenario
New software/service offering delivers insight to corporate executives and analysis to risk managers coping with the fallout of the euro crisis and continued global currency volatility -- while preparing for the prospect of a euro break-up into legacy currencies
SCOTTSDALE, Ariz., June 16 /PRNewswire/ -- Companies struggling to come to grips with the impact of the Greek debt crisis, an unstable euro and an increasingly volatile global currency market have a new set of automated tools and services available to help executives provide better financial stewardship to protect earnings and risk managers optimize their risk mitigation decisions. The newly-announced FiREapps EU-RX solution, one component in a portfolio of service and software offerings from FiREapps, helps companies assess and understand the potential FX impact to which they would be exposed if the Euro currency began to break up. FiREapps EU-RX provides deep insight to the risks companies face, by currency and by country, specifically tailored to the risks associated with euro zone countries today. Combining automated, software-driven data aggregation and analytical tools with custom service offerings, the FiREapps EU-RX solution provides data management, exposure calculation and analysis to address the "worst case" scenario -- a dissolution of the euro into multiple component currencies as countries withdraw from the euro zone.
"CEOs and CFOs of multinational companies today cannot keep pace with the events in global currency markets, and face foreign currency risks to which they don't have complete visibility in a timely fashion," said FiREapps CEO Wolfgang Koester. "In response to the current euro crisis, and the ripple effect of volatility in all currencies, we're providing our clients a solution that quickly provides executives with the ability to understand their true exposure and total risk, while giving risk managers the tools they need to make better decisions, faster."
The EU-RX offering is one component of a portfolio of solutions designed to help companies cope with ongoing global currency volatility. Other elements in the FiREapps portfolio of global protection services include:
• FX impact analysis for the P&L and balance sheet Foreign exchange exposure management system and process diagnostics
• FX exposure management policy review
• Cost-benefit analysis to reduce FX management costs, and more
The FiREapps software solution interacts with corporate business data systems to provide a complete, accurate and timely view of corporate foreign exchange exposures. The business intelligence that FiREapps derives from these source systems, including major ERP systems such as SAP and Oracle, can be fed downstream to automated trading platforms and treasury management systems.
Impacts of Global Currency Volatility on Multinational Companies
The decline in the value of the euro since January 2010 could have a tremendous negative impact to the corporate value of multinational companies who did not take adequate action to mitigate foreign currency risk, according to John Mathis, Ph.D. and Director of the Global Financial Services Center at Thunderbird School of International Management. Amidst the hyperbole of the market reaction to the current euro crisis, Mathis sees an opportunity for corporations to address the challenges that have prevented them from adequately managing FX risks in the past.
"The hysteria of the marketplace notwithstanding, corporate risk managers must take a rational approach to analyzing FX risks, and that begins with an accurate assessment of their exposure," Mathis said. "In today's unstable euro environment, companies have a responsibility to understand the economic impacts of a worst case scenario such as a euro dissolution, so they can provide proper guidance to the street and manage risk rather than reacting to events as they unfold."
While Q2 2010 results are months away, companies like Priceline.com, who reported healthy revenue and profit growth in Q1, have seen their stock decline in light of the euro decline. Priceline's stock declines 14% on Q2 guidance that cited negative currency impacts due to the euro.
From Exposure Data to Business Intelligence
Treasury needs to make timely and informed decisions to mitigate FX risk, however most organizations struggle to aggregate relevant data from ERP and other business systems to calculate and analyze their exposure. According to a January 2010 global study conducted by FiREapps and SunGard Data Systems, (59%) of companies surveyed reported an unanticipated material FX loss or gain in the past twelve months -- a 45% increase from the prior year.
"More than ever, CEOs and CFOs who assume responsibility for the health of corporate income statements and balance sheets need to understand their FX exposure and play a more active role in their risk management strategy," said Koester. "FiREapps provides companies with an on-demand dashboard that allows executives and practitioners to focus more on achieving financial results and less on speculation about possible outcomes."
Powerful Exposure and Scenario Analysis Capabilities
Beyond data management, FiREapps has powerful analytical tools that provide greater insight to the potential economic impacts of foreign exchange risk. Relying on accurate, detailed information from FiREapps, treasurers can prioritize their management of currency exposure by potential economic risk and begin to make business changes now to reduce potential exposure to legacy European currencies. FiREapps advocates transparency to all exposure and all currencies as the euro crisis is not limited to the euro alone. Optimized decision-making requires complete data for all currency exposure and risk.
"FiREapps customers are savings millions by managing their currency exposure in a timely manner and having up-to-date information to make adjustments as conditions change. This can make all the difference from an economic standpoint," said Koester.
For background information and additional research related to the impact of FX on corporate value, please see the full Thunderbird webcast at: www.youtube.com/watch?v=6TAyngvsAys&feature=player_embedded.
FiREapps is the category creator and leading provider of on-demand pre-trade foreign currency exposure management software solutions to reduce the cost and risk of foreign exchange. The FiREapps Software as a Service platform manages data from any business system and delivers timely, complete and transparent FX exposure calculations and powerful decision support analytics. As a result, treasurers are empowered to make rapid, informed, and cost-effective currency risk management decisions.