Insight & Analysis

Press release: Volatility causes third consecutive quarter of increasing FX losses for North American and European companies

Published: Jul 2019

16th July 2019 – Ongoing market volatility stemming from Brexit, trade wars, and other supply chain disruptions resulted in $23.39 billion in foreign exchange (FX) losses for publicly traded North American companies during the first quarter of 2019, according to the new Kyriba Currency Impact Report (CIR), a comprehensive report that details the impact of foreign exchange (FX) exposures among 1,200 companies in North America and Europe.

This is the third consecutive quarter of increasing losses for North American and European companies, according to the report. In addition, the average negative currency impact per company in North America jumped 12 percent to $88 million in Q1 of 2019, equal to nearly $1 million per day.

“With today’s tools and technology, CFOs no longer need to accept these FX losses as a ‘cost of doing business,’” said Wolfgang Koester, Chief Evangelist for Kyriba. “Given today’s market conditions, currency volatility will only continue. CFOs and CEOs need to be pro-actively empowering their teams to monitor and manage their currency exposures accurately and in real-time to adjust as necessary, consequently avoiding further negative impacts on financial performance.”

The CIR is the most comprehensive report of its kind in detailing the impact of foreign exchange (FX) exposures among publicly traded companies, with median revenue of $1.027 billion in the first quarter. In addition, all companies in the report are doing business in more than one currency, with at least 15 percent of their revenue coming from other nations.

For the 10th consecutive quarter, North American companies indicated the euro as the most impactful currency, with nearly one-half of companies mentioning it during their first quarter earnings calls, according to the report. Business services and the medical equipment industries experienced the greatest impact from currencies, as those industries continue to be impacted by Brexit and other volatile geopolitical events around the globe.

European Companies See Increasing Currency Impacts

Publicly traded European companies monitored in the Q1 2019 report indicated a collective currency loss of $3.31 billion, up from $3.08 billion in the fourth quarter of 2018. This translates into an average of $276 million per company during the first quarter, equal to more than $3 million per day. While the sample size of European companies is smaller than North American, the report shows increasing impacts in both regions for the last three quarters.

The euro also topped the list as the currency most mentioned as impactful by European companies during Q1 2019 earnings calls, with the US dollar identified as the second most mentioned currency. The chemical manufacturing along with the biotechnology and drug industries experienced the worst impact from negative currency adjustments across European sectors.

“Global volatility is now impacting North American and European corporates who are not applying best practices in currency risk management with greater force,” Koester continued. “This is a new trend as we typically see a binary relationship in FX impacts. Taking an initial look into Q2 2019, we don’t see these trends reversing anytime soon.”

To learn about specific industries that were affected and which currencies were most impactful to corporations, download the full Kyriba Currency Impact Report.

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