Imagine a Sick or Dying Euro
Is foreign currency exchange (FX) volatility a concern of yours? If you manage payables or receivables processes for a large organization that buys or sells in the Eurozone, you should be thinking “outside the box” when it comes to recent FX volatility. And you should pay particularly close attention to the outlook for the Euro. Chances are, your organization’s treasury managers are already developing contingency plans for funding procurement, paying suppliers, and collecting cash from customers should the unthinkable happen: the Euro ceases to exist.
Your counterparts in treasury are probably also working on less-extreme but equally worrisome scenarios, including: “What happens to cross-border sales and cash flows if a weak EU country such as Greece declares it will no longer honor the EU currency and reverts to its legacy currency, the drachma?”
A new report published by The Association of Corporate Treasurers provides a compelling analysis of potential scenarios, entitled “Euro Contingency Planning.” This briefing includes sound advice on how to understand and prepare for potential disruption of cross-border trade. This report was written for treasury managers, and it contains concepts and terminology that non-treasury people may find daunting. But my advice is to take a look, absorb what you can, and then start conversations with your team about what this may mean in your world.