This year's EuroFinance conference took place in Barcelona, set against a backdrop of political turmoil in the Catalonia region of Spain. The irony was not lost on conference attendees that the political instability in the host city could be compared to the increasing turbulence that treasurers face every day. Treasury must rise above currency volatility, sovereign risk, regulatory compliance challenges, payment fraud schemes, proposed tax reform and other issues.
World events over the last 18 months have resulted in some significant currency movements – and many European companies have suffered as a result. Deutsche Telekom, for example, reported that net profit was down 18% last year when the company’s stake in BT lost value “mainly as a result of a fall in BT’s share price and in the pound sterling following the Brexit referendum.” Meanwhile, EasyJet reported pre-tax losses of £212m in the first half of this year, largely due to the weaker pound.
The ability to enter into new markets geographically can help drive top line revenue growth, or offer cost-cutting advantages in production and output. Companies expand internationally in one of two ways: organically or through M&A activity. International growth carries with it a number of added risks, the most prominent being currency. With the constant volatility in markets and geopolitical uncertainties in every geographic region (Trump, Brexit, North Korea, Venezuela riots), companies are struggling to centralize this risk.