What Kyriba’s quarterly currency impact report reveals about global risk management

As the world becomes more and more interconnected­­­­­­, currency fluctuations can seriously impact a company’s bottom line and ability to remain competitive. Kyriba, a global leader in liquidity performance, has issued its Q1 2024 Currency Impact Report that sheds light on these challenges and underscores the need for businesses to stay ahead with smart financial strategies.

The report reveals that after Kyriba analyzed the earnings of 1,700 publicly traded companies in Europe and North America, it found that these firms dealt with a total of $21.55bn in currency impacts this quarter alone, split between $9.83bn in negative impacts (headwinds) and $2.72bn in positive impacts (tailwinds). This significant amount highlights the urgent need for effective currency risk management.

For companies operating globally, currency swings can mean big trouble. Sudden changes in exchange rates can cut into profits and make financial planning more burdensome. This report highlights why it’s crucial for businesses to have strong strategies in place to manage currency risk.

“Currency volatility continues to pose a substantial risk to multinational corporations, significantly impacting their bottom lines,” said Melissa Di Donato, chair and CEO of Kyriba. “Our latest report underscores the heightened challenges companies faced in the first quarter of 2024. More importantly, it reinforces the critical need for strategic currency risk management and the use of advanced predictive analytics to mitigate these risks and optimize liquidity performance.”

Among the key highlights, North American companies saw a huge 219 percent jump in FX impact, totaling $8.38bn in the first quarter of 2024. Around 19 percent of North American multinationals reported currency impacts, especially in industries like healthcare equipment, machinery and life sciences tools and services. In contrast, European businesses reported $2.72bn in FX-related losses, which is 65.2 percent less than the previous quarter. Among the 850 Europe-based companies analyzed, 8.5 percent reported headwinds, with 36.1 percent quantifying their negative impacts. The construction and engineering sector was hit the hardest, followed by healthcare equipment and then auto components.

The report also pointed out that the US dollar was the most mentioned currency in European earnings calls, followed by the Swedish krona and the euro. The Turkish lira was noted as the most volatile currency while the euro was the most volatile when adjusted for GDP. These findings suggest that currency fluctuations continue to play a major role in financial outcomes for businesses across the globe.

Looking ahead, the trends in early 2024 suggest a strong US dollar, which could mean more challenges for US companies later this year.

“The early 2024 trends are showing an unexpected strength in the US dollar, thus forecasting a rise in FX headwinds for US corporations for the second half of 2024,” said Andy Gage, SVP of FX solutions and advisory at Kyriba. “Inflation, coupled with this strong dollar, is putting additional pressure on global economic stability, making it imperative for companies to employ robust risk management strategies.”

Kyriba provides key tools to address the currency challenges highlighted in this Q1 2024 Currency Impact Report. Its Currency Risk Management platform uses real-time data and predictive analytics to manage currency exposures. Cash and Liquidity Management tools help businesses forecast cash flows and maintain liquidity. Their Treasury Management System integrates with existing financial systems for accurate data and better decision-making. These tools aim to help companies navigate currency swings and strengthen financial resilience.