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Market volatility widens FX losses for North American companies

Ongoing market volatility caused by Brexit, trade wars, and other supply chain disruptions resulted in US$23.39 billion in foreign exchange (FX) losses for publicly traded North American companies over the first quarter of 2019, reports Kyriba.

The cloud-based software provider’s latest Currency Impact Report (CIR) details the impact of FX exposures among 1,200 companies in North America and Europe.

The report finds that Q1 2019 was the fourth consecutive quarter of increasing losses for North American companies. In addition, the average negative currency impact per company in North America jumped 12% to $88 million in the three-month period – equal to nearly $1 million per day.

“With today’s tools and technology, chief financial officers (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.”

Euro makes most impact

Kyriba’s CIR details the impact of FX exposures among publicly traded companies, with median revenue of $1.027 billion in Q1 2019. In addition, all companies in the report are doing business in more than one currency, with at least 15% 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 half of the companies surveyed 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 Q4 2018. This translates into an average of $276 million per company during the first quarter, equal to more than $3 million per day.

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 sector, 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,” said 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.”

Further details on the specific industries affected and the currencies most impactful to corporations are in the full CIR, which can be downloaded here.

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