Kyriba's Currency Report Released, $11.98 Billion Was the Total Impact from FX Volatility

Kyriba's Currency Impact Report (CIR) showed that $11.98 billion was the total impact on earnings from FX volatility. The quarterly report measures the FX exposure of 1,200 US and European companies.

The companies reported $9.86 billion in tailwinds and $2.13 billion in headwinds in the Q3 of 2021. US companies saw greater tailwinds than European firms, which was a +$9.32 billion positive impact and a decrease of 145% from the previous quarter.

European firms reported a +$541 million positive FX impact, which translated into -20% when compared to the previous quarter.

Wolfgang Koester, the Chief Evangelist for Kyriba, said about the report: “Headwinds and tailwinds combine to reveal the vulnerability North American and European multinational corporations’ revenues and earnings per share have to currency movements.

“As the era of low interest rates and, potentially, the strong US Dollar concludes, these quantified impacts are a troubling warning sign as this next environment will become more challenging for CFOs to achieve the industry standard MBO of less than $0.01 EPS impact and protect their balance sheets and income statements from currency 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.

“CFOs have a long way to go to mitigate risk and include substantial currency gains as part of their earnings revenue.”

Key Highlights from the CIR Report

The Average Earnings per Share (EPS) of US companies in the third quarter of 2021 rose to $0.04, which is 4 times the recommended $0.01 EPS impact.

Additionally, US companies reported $9.32 billion in positive FX impact. The total of the negative currency impact for US companies reached $929 million.

Moreover, the Canadian dollar (CAD) was the currency that had the greatest impact. 33% of US corporations reported that the Canadian Dollar has the greatest impact on revenues. The Euro (EUR) came in the second spot according to 27% of North American firms.

European companies pointed that EUR had the greatest impact on earnings. The Swedish Krona (SEK) came in second, followed by the US Dollar (USD) at the third place.

On top of that, the top 4 sectors that saw the largest impact from currencies in the US are machinery, trading & distribution, professional services, biotech & pharmaceuticals, healthcare equipment & supplies, electronic equipment, and instruments & components.

“Supply chain disruption, currency volatility and inflation are testing CFOs and treasurers’ enterprise liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term strategies. For the remainder of 2022, execution of applicable best practices to protect shareholder value will be a large driver for growth and necessary risk reduction.

“CFOs need to demonstrate to their investors and Boards how to best optimize enterprise liquidity in this new economic environment. They are going to be expected to demonstrate strong balance sheet and cash forecasting precision with various cash flow scenarios,” added Koester.

All companies in the CIR report conduct their operations with more than one currency. 15% of the generated revenue is from countries that are located outside of their headquarters.