San Diego – In a stunning turnaround, Kyriba’s Currency Impact Report (CIR), a comprehensive report detailing the impacts of foreign exchange (FX) exposures from the global leader of cloud finance, treasury and IT solutions, revealed European multinational corporations suffered the brunt of the $9.82 billion reported lost due to currency volatility in the third quarter of 2020. Foreign exchange losses increased 126 percent in a single quarter for European companies, causing more than $7.61 billion in FX losses. North American corporations, by comparison, contained their losses as a result of currency volatility to $2.21 billion—the ninth largest impact since 2017, despite a weaker U.S. dollar and low volatility. Kyriba’s CIR details the impact of FX among 1,200 multinational companies based in North America and Europe.
“This quarter should be a wake-up call for corporations that haven’t taken the necessary steps to actively manage risks across the enterprise. Market conditions resulted in dire consequences for European companies that didn’t put in place the means to address currency exposure risks; and for North American companies to suffer billions in losses due to currency volatility and low U.S. dollar volatility is unwarranted and totally preventable,” said Wolfgang Koester, Chief Evangelist for Kyriba. “It’s absolutely clear that CEOs and their finance chiefs must be better prepared to manage currency exposure and mitigate impacts from future headwinds, as these past months are signaling a weakening dollar yet to come.”
Highlights from the Q3 2020 Kyriba Currency Impact Report include:
- For the first time since 2019, North American companies indicated the euro (EUR) as the most impactful currency, with 24 percent of companies referencing the euro in their Q3 earnings calls. The Brazilian real (BRL) fell out of the top spot and was the third most referenced currency.
- The Chinese yuan renminbi (CNY) was the third most impactful currency for North American companies, followed by the Mexican peso (MXN) and Korean won (KRW).
- The average earnings per share (EPS) impact from currency volatility reported by North American companies in Q3 2020 remained at $0.04—four times greater than the industry standard MBO of less than $0.01 EPS impact.
- The top five industries that experienced the greatest impact from currencies in North America were health care, machinery, professional services, technology and biotech. The top five industries that reported the greatest impact for Europe were communication services, electronics, biotech, chemicals and health care.
- Publicly traded European companies that qualified to be monitored in the Q3 2020 report had a collective currency loss of $7.61 billion.
- The U.S. dollar replaced the euro as the currency most mentioned as impactful by European companies during Q3 2020 earnings calls, followed by the Brazilian real, with the euro ranked third.
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 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 Q3 2020 Kyriba Currency Impact Report here.
To hear more about how companies are managing FX impacts, join our webinar January 21, ‘Merck and Kraton: FX Success in Companies Big and Small.’