Insight to All Things Currency and Treasury Management

The release of the FiREapps Q1 2017 Currency Impact Report depicts a quantified negative currency impact of $6.7 billion by North American and European corporations, with North American corporations reporting $6.47 billion of the total quantified negative impact.

This impact, the lowest for North American companies since Q3 2014, is a continuation of what we have seen over the previous three quarters. However, a bout of low volatility does not mean corporations can ignore their FX exposures. For example, after eight straight quarters of low volatility from Q4 2012 to Q3 2014, North American corporations experienced two consecutive quarters of high volatility. The spike of volatility in Q4 2014 and Q1 2015 created a combined $47.6 billion dollars in sustained impacts by North American corporations, far greater than the collective $30.44 billion in negative currency impact they sustained over the previous eight quarters combined.

History has proven that the current bout of low volatility will not last – volatility is caused by surprises, meaning it is impossible to speculate on what will affect FX and when. A spike in volatility is inevitable and unsuspecting corporations who are not managing their exposures will experience deep negative impacts, but insight into exposures and an understanding of their EBITDA or EPS at risk can help determine where improvements can be made to a company’s FX management program.

The good news is, it can be done as there are currently treasury teams protecting their entire basket of currencies now and those multinationals do not need to speculate on how long this period of low volatility will last or when the next surprise will occur because they have confidence in their currency data and have managed their exposures accordingly.

According to the Wells Fargo 2016 Risk Management Practices Survey, many name market volatility, when to hedge, using a proper strategy and access to accurate, timely data as their greatest FX risk management challenges.

To overcome these challenges, corporate treasury professionals need to proactively advocate for a new and improved FX management program that looks thoroughly at their balance sheet and forecasted cash flow exposures.

Through its cloud-based technology, FiREapps helps clients and prospects identify their sensitivity to FX and empowers them to manage their exposures using accurate, complete and timely data. Having clear insight into their exposures helps companies gain the confidence they need to better protect themselves against currency risk.

To learn more about how North American and European multinationals were impacted by FX, download the Q1 2017 Currency Impact Report.