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 financial market price and rate changes. 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: 2022 2021 2020 (Decrease) in revenue (3) % (4) % (4) % Increase (decrease) in net income 2 % 1 % 12 % Remeasurement risk We experience fluctuations in transaction gains or losses from the 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, 2022 December 31, 2021 December 31, 2020 Foreign currency (loss) gain $ (10,164) $ (8,352) $ (7,782) 34