If you’re a financial exec charged with managing your firm’s FX exposure, you’ve had your work cut out for you lately. As if the drooping economy weren’t bad enough, the dollar has been – of all things – strengthening. While the U.S. economy is weak, it’s still not as bad (or at least not perceived to be as bad) as many others, says Wolfgang Koester, corporate currency strategist with Fireapps, an FX exposure management company. At the same time, currency volatility has nearly doubled, Koester adds, rising from about 8 percent to the mid-teens.

As a result, the methods many treasurers have used to manage currency exposure may not cut it any longer. Most companies have relied on their financial consolidation programs, aided by ad-hoc and spreadsheets – the “gum-in-the-dam scenarios” — to get an idea of their exposures, Koester notes. That worked fine when the markets remained on a relatively even keel, and you had just a few exposures. Today, most multinational companies have 50-some currency pairings, Koester notes. Companies that operate in multiple currencies need to up-to-the-minute visibility to exposures today.

To be sure, Koester has an interest in promoting systems that can offer this kind of visibility, as that’s what his company sells. However, it’s worth noting the impact that FX exposures have had on companies’ bottom lines recently. In their first quarter earnings announcements, a list of blue-chip companies, including DuPont, Manhattan Associates, Harley-Davidson, and Mattel, indicated that unfavorable currency movements had cut into their income. The typical hit was several percentage points. When companies are struggling to get every sale possible, that hurts. ###