Nightmare Scenario: A Cataclysmic Collapse of the Euro

Mary Driscoll's Profile

Nightmare Scenario: A Cataclysmic Collapse of the Euro   

Fitch Ratings, the global credit rating agency, was in the news today with a dire warning about the future of the Euro. While Fitch did not come right out and predict a full Euro collapse, it turned up the heat on the European Central Bank, which is trying (some would say stumbling) to address sovereign debt crises across the continent.

That macro picture is already stirring corporate response. A growing number of CFOs and treasurers are now studying steps they can take to protect cross-border cash flows and financial assets housed in European banks. Similarly, procurement chiefs and credit officers are scrutinizing commercial contracts to better gauge their exposures to FX volatility. Word also has it that some supply chain managers are no longer signing contracts for materials procured from Europe. They are tapping the FX spot market to facilitate purchases.

Treasurers are also modeling country-specific 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. The report, entitled “Euro Contingency Planning,” includes sound advice on how to understand and prepare for potential disruption of cross-border trade and, maybe, a full-blown financial crisis in Europe. To download the report, click here:  http://tinyurl.com/MDACTEUR