Insight to All Things Currency and Treasury Management

The political and financial climate in Europe is quite tumultuous right now, and days of security and ease do not appear to be on the horizon any time soon. There are some big questions that loom on the horizon for Europe, one of largest being: “What is the real future of the euro?” The recent elections in France and Greece have clearly brought the euro’s future into an even brighter spotlight, and now Citigroup has stated there is now a 50% to 75% chance of Greece leaving the euro in the next year to 18 months. However, the bigger fish that may be set to fry here could actually be Spain, which recently announced the transfer of their banks’ toxic real estate assets. I recently discussed this issue on the PBS station’s Nightly Business Report.

Also discussed during this interview was how American companies need to be ready for the FX volatility that is likely to come from the instability in the European marketplace. This is a subject that, as CEO of a company that provides foreign currency exposure management software, I deal with closely every day. What I have learned is that while no one can specifically know how this euro crisis will play out, and businesses can only truly manage these uncertain times by managing currency pairs through fact-based analysis. In our work with clients, I am seeing that more and more top financial corporates — and even CEOs — are understanding the importance of managing this exposure properly. In fact, when we analyzed the poll results from a recent webinar we sponsored of senior corporate financial professionals, we found that nearly 50% of respondents are actively involved in a euro-readiness plan, where only 12% decided not to address it and 19% have not started yet. 

As euro readiness plans are obviously becoming more of a top-of-mind issue for executive and audit committees, it is clear that now is the time for corporates to obtain clarity around their euro readiness plan. But the euro is actually just part of the FX exposure equation, as risk is clearly coming from other markets as well, such as Japan and Australia. The true ultimate goal is for financial corporates from companies of all shapes and sizes who deal in FX to become currency agnostic. So, no matter where the currency storms are coming from, they will be prepared and stay afloat.

There are three simple steps to becoming currency agnostic: 1) gain visibility and confidence in your euro exposure, 2) identify and plan to exploit your natural hedging options, and 3) leverage automation and analytics to operationalize this process. While this may seem like a daunting and overwhelming task, it actually is not. In fact, as a way to get started, FiREapps has developed our EU-RX™ solution to help businesses quickly and easily begin to assess their organization’s euro exposure. With EU-Rx, financial managers will be able to assess total euro exposure in less than 60 days and develop tactical and strategic plans to properly weather the euro storms that likely lie ahead.

So the big question to ask yourself now if you have exposures is simply: Are you ready? The answer may be one to truly and seriously think about.

— Wolfgang Koester

Wolfgang Koester is the CEO of FiREapps, the leading provider of foreign currency exposure management software, based in Scottsdale, AZ. He has managed risk for Fortune 100 companies as well as governments, including G-10s, since 1986. To learn more about FiREapps, go to