Skip to main content

Currency volatility costs companies nearly $12bn in FX in Q1

posted onAugust 12, 2020
nocomment

Currency volatility has caused more than $12 billion in Q1 2020, according to the latest Kyriba Currency Impact Report (CIR) which details the impact of foreign exchange (FX) among 1,200 multinational companies based in North America and Europe.

This is a 37 percent increase from the previous quarter, with much of the impact coming from the consequences of the COVID-19 outbreak on the economy. The spike in currency volatility marks the sixth time in seven quarters that the quantified negative currency impacts have been more than $10 billion.

“Multinational corporations simply can’t afford to lose revenue to currency volatility as the global economy contracts,” said Wolfgang Koester, Kyriba's FX risk expert.

According to Koester, payments fraud risk is also a significant challenge to corporate governance and balance sheets, and will only increase under the current economic climate.

Highlights from the Q1 2020 Currency Impact Report include:

  • North American companies indicated the Brazilian Real as the most impactful currency, with 34 percent of companies referencing the currency in their Q1 earnings calls.
  • The Euro was identified as the second most impactful currency for North American companies, snapping its twelve-quarter streak as the most impactful.
  • The average earnings per share (EPS) impact reported by North American companies in Q1 2020 was $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 started to be affected by the global pandemic.

“The Brazilian Real’s leap to the most impactful currency to North American companies demonstrates how challenging this period is for CFOs and treasurers,” said Koester. “We will continue to witness major depreciation until the global currency war subsides.”

In Europe, Currency Impacts Are Up 58 Percent
Publicly traded European companies which qualified to be monitored in the Q1 2020 report indicated a collective currency loss of $1.44 billion, following two consecutive quarters of sub-$1 billion impacts. The Euro traded places with the Dollar as the currency most mentioned as impactful by European companies during Q1 2020 earnings calls, followed by the Brazilian Real, the Chinese Yuan and the Mexican Peso, as shown in the report.

The CIR is a comprehensive report, detailing the impact of foreign exchange exposures among publicly traded companies. In addition, all companies in the report do business in more than one currency, with at least 15 percent of their revenue coming from other nations.