In the past year, there has been a significant fluctuation in major currencies, impacting European corporate finances, with the Netherlands being affected the most at 94%. Despite the collapse of several financial institutions, European Chief Financial Officers are adapting their strategies to effectively manage foreign exchange (FX) risks.

According to the MillTechFX European Corporate CFO FX Report 2024, the volatility of the euro has been a central concern for European businesses, with nearly 40% of their activities exposed to foreign currencies. The fluctuation of the euro has directly affected financial results, with 78% of European corporates reporting the impact of the euro's volatility. This trend is most pronounced in countries like the Netherlands, Switzerland, and Denmark.

Euro Volatility and Its Impact on European Corporates

Besides the challenges posed by the volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term of the euro, many European corporates still rely on manual FX processes, which are inefficient and resource-intensive. The reliance on manual methods for price discovery, trade execution, and settlement has resulted in a significant cost for most organizations.

Meanwhile, the institutions in Europe face transparency challenges in the FX market, with 59% expressing concerns. Hidden costs and tailored pricing models often obscure the true cost of FX transactions, making it difficult for corporates to gauge whether they are getting the best deal.

In response to the inefficiencies of manual processes, European corporations are increasingly exploring automation Automation Automation is defined as the procedure of making an apparatus, a process, or a system to operate by mechanical or electronic devices that replace human labor. Additionally, automation is also sometimes referred to as mechanization or robotization. For example, employees have many costly needs, including government regulations. However, robotic workers don’t need much other than some routine maintenance and the occasional bug fix for an equipment malfunction or software bug. There is no overtime Automation is defined as the procedure of making an apparatus, a process, or a system to operate by mechanical or electronic devices that replace human labor. Additionally, automation is also sometimes referred to as mechanization or robotization. For example, employees have many costly needs, including government regulations. However, robotic workers don’t need much other than some routine maintenance and the occasional bug fix for an equipment malfunction or software bug. There is no overtime Read this Term and outsourcing solutions for their FX operations. Digital platforms offer centralized price discovery, streamlined workflows, and enhanced transparency, driving efficiency across the FX space.

Additionally, the consideration for environmental, social, and governance (ESG) objectives are reshaping the FX landscape, influencing the selection of FX counterparties and service providers by corporations. With stakeholders placing greater emphasis on sustainability, most corporations are integrating ESG criteria into their FX practices.

Some of the steps taken by businesses to enhance ESG compliance, include embracing initiatives like the FX Global Code and partnering with ESG-compliant service providers.

Interest Rates and Inflation

Euro volatility continues to sway the financial landscape for European corporates, with the past year presenting a blend of challenges and opportunities.

Amid rising interest rates, inflationary pressures, geopolitical uncertainties, and banking sector crises, CFOs have been compelled to reassess their risk management strategies and FX practices.

The fluctuation of the euro over the past year underscores the significance of FX risk management for European businesses. From hitting six-month lows to substantial gains against the dollar, the volatility of the euro has left a tangible impact on corporate financial results. Notably, 78% of the European firms surveyed reported being affected by this trend.