The impact of currency volatility soared 44 percent in a single quarter, causing more than $17.5 billion in foreign exchange (FX) losses in Q2 2020, according to the latest Kyriba Currency Impact Report (CIR), a comprehensive report from the global leader of cloud finance, treasury, and IT solutions. The report details the impact of FX among 1,200 multinational companies based in North America and Europe. The spike in currency volatility marks the seventh time in eight quarters that the quantified negative currency impact has been more than $10 billion.
“FX losses are the consequence of companies not fully understanding, nor being able to actively manage, their global liquidity. The pandemic crisis has forced finance departments to react quickly to reduce losses and shore-up cash-flow by repatriating assets or taking on loans in different localities. It’s not surprising that companies that didn’t have complete visibility into their FX exposures suffered material losses. Couple this with intense currency volatility and you exacerbate a multi-billion-dollar problem,” said Wolfgang Koester, Chief Evangelist for Kyriba. “We cannot stress enough about the importance of implementing a full digital transformation to allow CFOs and treasurers the ability to report in real-time on cash forecasting, payments fraud protection, payments tracking, and more. An advanced Active Liquidity Management platform is crucial for modern finance leaders to better manage through the volatility that now defines our world. Without implementing such a solution, we’ll continue to see strains on free-cash-flow, including significant FX losses, payment fraud, and a reduction of working capital from multinational companies.”
Highlights from the Q2 2020 Currency Impact Report include:
- North American companies indicated the Brazilian Real as the most impactful currency for the second straight quarter, with 28 percent of companies referencing the Real in their Q2 earnings calls, followed by the Euro.
- The Canadian Dollar emerged as the third most impactful currency for North American companies, claiming a top five spot for the first time since Q2 2019.
- The average earnings per share (EPS) impact from currency volatility reported by North American companies in Q2 2020 remained at $0.04 – four times greater than the industry standard MBO of less than $0.01 EPS impact.
- Healthcare equipment and supplies and the professional services industries experienced the greatest impact from currencies, as those industries continue to be affected by the global pandemic.
- Publicly-traded European companies that qualified to be monitored in the Q2 2020 report indicated a collective currency loss of $3.37 billion. For the second quarter in a row, the Euro was reported as the currency most mentioned as impactful by European companies during Q2 2020 earnings calls, followed by the Brazilian Real.
The CIR is a comprehensive report, detailing the impact of foreign exchange exposures among publicly-traded companies. All companies in the report do business in more than one currency, with at least 15 percent of their revenue coming from nations that are located outside of their headquarters.
To learn about specific industries affected and which currencies were most impactful to multinationals, download the full Q2 2020 Kyriba Currency Impact Report here.
To hear more from Kyriba and Wolfgang Koester about navigating through market volatility and pandemic crisis, join the Kyriba Global Summit, a virtual event happening on November 10, 11, 17, with testimonies from finance and IT executives at Kraft-Heinz, Danone, Sisecam, Coca-Cola, Grand Vision, and more.
About Kyriba Corp.:
Kyriba empowers CFOs and their IT counterparts to transform how they optimize financial technology solutions, de-risk ERP cloud migration, and activate liquidity as a dynamic, real-time vehicle for growth and value creation. With 2,000 clients worldwide, including 20 percent of Fortune 500 companies, Kyriba’s pioneering Active Liquidity Network connects internal applications for treasury, risk, payments and working capital with vital external sources such as banks, ERPs, trading platforms, and market data providers. Based on a secure, scalable SaaS platform that leverages artificial intelligence, Kyriba enables thousands of companies worldwide to maximize growth opportunities, protect against loss from fraud and financial risk, and reduce costs through advanced automation. Kyriba is headquartered in San Diego, with offices in New York, Paris, London, Frankfurt, Tokyo, Dubai, Singapore, Shanghai and other major locations. For more information, visit www.kyriba.com.