PEGASYSTEMS INC 10-K

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk represents the risk of loss that may affect us due to adverse changes in financial market prices and rates. Foreign currency exposure Translation risk Our foreign operations’ operating expenses are primarily denominated in foreign currencies. However, our international sales are also primarily denominated in foreign currencies, which partially offsets our foreign currency exposure. A hypothetical 10% strengthening in the U.S. dollar against other currencies would result in the following impact: 2020 2019 2018 (Decrease) increase in revenue (4) % (4) % (4) % (Decrease) increase in net income 12 % (7) % (1) % Remeasurement risk We experience fluctuations in transaction gains or losses from remeasurement of monetary assets and liabilities denominated in currencies other than the functional currency of the entities in which they are recorded. We are primarily exposed to changes in foreign currency exchange rates associated with the Australian dollar, Euro, and U.S. dollar-denominated cash and cash equivalents, accounts receivable, unbilled receivables, and intercompany receivables and payables held by our U.K. subsidiary, a British pound functional entity. A hypothetical 10% strengthening in the British pound exchange rate against the Australian dollar, Euro, and U.S. dollar would result in the following impact: (in thousands) December 31, 2020 December 31, 2019 December 31, 2018 Foreign currency (loss) gain $ (7,782) $ 3,633 $ (6,295) 33