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The US$6.16bn cost of FX headwinds

Kyriba’s Currency Impact Report (CIR), a comprehensive report detailing the impacts of foreign exchange (FX) exposures among 1,200 multinational companies based in North America and Europe, has revealed negative impact from currency volatility of US$6.16bn in Q4 2020.

European companies experienced greater headwinds than their North American counterparts in the fourth quarter of 2020, reporting US$4.77bn in FX-related negative impact. By comparison, North American corporations reported US$1.39bn in negative impact. 

"Without additional US government stimulus spending in the foreseeable future, North American CFOs are now on notice that this quarter was their last chance to address currency exposure risks," commented Wolfgang Koester, chief evangelist for Kyriba. "The losses North American companies suffered in this quarter were preventable. In order to manage currency exposure and reduce negative impacts from inevitable spikes in volatility to come, CEOs are expecting their finance chiefs to be better prepared."

Impactful currencies

For the second quarter in a row, North American companies indicated the euro as the most impactful currency, with 33% of companies referencing the euro in their Q4 earnings calls. The Brazilian real moved up a spot as the second most referenced currency. The British pound was the third most impactful currency for North American companies, followed by the Chinese yuan renminbi and Swiss franc.

The US dollar remained the currency most mentioned as impactful by European companies during Q4 2020 earnings calls, followed by the euro, with the Swedish krona ranked third.

The average earnings per share (EPS) impact from currency volatility reported by North American companies in Q4 2020 dropped to US$0.03 - three times greater than the industry standard MBO of less than US$0.01 EPS impact.

Industry impact

The top five industries that experienced the greatest impact from currencies in North America (in order) were electronic equipment, professional services, healthcare equipment, biotech and pharmaceuticals and technology hardware. 

The top five industries that reported the greatest impact for Europe (in order) were electronic equipment, biotech and pharmaceuticals, chemicals, healthcare equipment and auto components.

Methodology

The Kyriba Currency Impact Report 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% of their revenue coming from nations that are located outside of their headquarters.

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