Ribbon Communications Inc. 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to a variety of market risks, changes in interest rates affecting the return on our investments and foreign currency fluctuations. To manage the volatility related to the exposure to changes in interest rates, we have entered into a derivative financial instrument. Our objective is to reduce, where it is deemed appropriate to do so, fluctuations in earnings and cash flows associated with changes in interest rates. Our policies and practices are to use derivative financial instruments only to the extent necessary to manage exposures. We do not hold or issue derivative financial instruments for trading or speculative purposes. Amounts reported in accumulated other comprehensive (loss) income related to our derivative will be reclassified to interest expense as interest is accrued on our variable-rate debt. Our derivative had a fair value of $10.9 million at December 31, 2020, consisting of $3.1 million included in Accrued expenses and other and $7.8 million included in Other long-term liabilities on our consolidated balance sheet. Based upon projected forward rates, we estimate as of December 31, 2020 that $3.2 million may be reclassified as an increase to interest expense over the next twelve months. At December 31, 2020, we had outstanding debt totaling approximately $393.1 million. A hypothetical movement of plus or minus 50 basis points in the interest rate of our outstanding debt would have changed our interest expense by approximately $2 million for the year ended December 31, 2020. Based on a hypothetical 10% adverse movement in all foreign currency exchange rates, our revenue for the year ended December 31, 2020 would have been adversely affected by approximately $22 million and our net income for the year ended December 31, 2020 would have been adversely affected by approximately $7 million, although the actual effects may differ materially from this hypothetical analysis. 56 Table of Contents