Investors and stakeholders evaluate companies based on their fundamentals including the strength of their balance sheet and the predictability of cash flows. Currency volatility is one of the largest financial risks impacting balance sheets, cash flow predictability, and of course, earnings per share today. As Wolfgang points out in his latest CNBC interview, we’re hearing this from CEOs, CFOs and Treasury teams more and more frequently now. If we’ve learned anything from the 2008 credit crisis, it’s that Pericles was right when he said: “The key is not to predict the future, but to be prepared for it.”
Being prepared for the new Euro is achievable in a short time frame and many companies are taking appropriate steps. Multinationals without a clear line of sight to their foreign exchange exposure will be in worse shape when the Euro restructures than companies with the wrong kinds of investments were in the 2008 credit crunch. The real issues won’t be limited to USD-Euro. It’s the ripple effect into other currencies that will create highly visible surprises.
Fact-based collaboration across treasury and regional controllers is the key to getting the facts on the ground connected to global exposure management processes. Understanding exposure is essential to managing FX risk in today’s volatile markets.
No one knows exactly what will happen with the Euro or when. But being prepared is something prudent businesses are doing now. Be ready with FiREapps.