Corporate America Ill Prepared for Rising Interest Rates

Two-thirds of U.S. corporate decision-makers have not locked in favorable rates to mitigate their interest rate and foreign exchange exposure, a decision that can cost their firms millions of dollars, according to a survey released by Citizens Bank. According to a statement from Citizens, the survey found that business leaders expect rates to continue to rise and the value of the dollar to fluctuate due to tariffs and other macroeconomic factors.

The Citizens Market Insights Survey of more than 300 corporate leaders finds that:

• 70 percent of U.S. corporate leaders have not locked in lower interest rates despite signs that rates will continue to increase,
• 67 percent have not used a hedging strategy to mitigate their exposure to fluctuations in the value of the U.S. dollar,
• 72 percent of corporate leaders, however, say their company plans to take action to keep their business successful in an economy with rising interest rates,
• 74 percent indicate their company plans to address a potential change in U.S. dollar valuation.

“Foreign exchange and interest rate fluctuations can cost companies significant amounts of money each year so it’s very surprising that more businesses aren’t taking advantage of simple hedging strategies that can help reduce their risk,” says Tony Bedikian, head of global markets at Citizens Bank. “Many banks, including Citizens, offer a range of solutions that help corporate clients mitigate risk so the future becomes more predictable and they don’t have to worry as much about volatility in the markets.”