Search
 

Data Management in Multicurrency Accounting

Successful currency risk management requires exposure data you can trust. These best practices can help get you there.

By Wolfgang Koester | Updated on September 09, 2014
In the past two years, multinational companies have lost at least $68 billion as a result of currency surprises. In 2013, the average impact to earnings per share (EPS) from currency surprises was US$0.03. Considering that foreign exchange (FX) managers from leading multinationals have management objectives of less than $0.01 EPS impact from balance sheet exposures, an average $0.03 hit to EPS from all exposures is large and material.

Why do some companies continue to experience these kinds of currency surprises? When surprises are frequent, it is a sign that the company doesn’t have accurate, complete, and timely visibility into its foreign currency exposures across its entire portfolio of currency pairs. Often, the barrier preventing a company from getting that visibility is use of inconsistent and/or improper multicurrency accounting practices.

It is said that you can’t manage what you can’t measure. In the world of FX, that is certainly true. When corporate treasury teams can’t accurately measure their exposures—when they don’t have accurate, complete, and timely visibility—they cannot possibly prevent currency surprises. It is not a question of whether hedging is effective. If the exposure data that treasury is getting from accounting is inaccurate or incomplete, which is to say if there are data-integrity issues, treasury can execute currency risk management tools within company policy and still sustain significant FX surprises.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.

Already have an account?

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Recommended Stories

Treasury & Risk

Join Treasury & Risk

Don’t miss crucial treasury and finance news along with in-depth analysis and insights you need to make informed treasury decisions. Join Treasury & Risk now!

  • Free unlimited access to Treasury & Risk including case studies with corporate innovators, informative newsletters, educational webcasts, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM publications including PropertyCasualty360.com and Law.com.

Already have an account? Sign In Now
Join Treasury & Risk

Copyright © 2024 ALM Global, LLC. All Rights Reserved.