The Infrastructure of the Main Street Capital Corporation: International Risk - Term Paper Example

? International Risk Term Report Prepared By ized by ity Your This report reviews the infrastructure of the Main Street Capital Corporation (MSCC) and after a thorough perusal it elucidates the rules and regulations of the insurances policies in those countries which are being operated outside the United States. The report discusses the MSCC loss exposures and political risks regarding the operations of business and finance. Furthermore the report discourses on the working of the firm outside the United States in some other country. Then the debate of the risk exposure and how to cater or retain the aroused risks are presented in detail.Finally the role of insurance in a country and its requirement and pros and cons are being introduced in the final section of the report. Introduction Main Street Capital Corporation (MSCC) was founded on 9, March 2007 with a diverse purpose agenda. The firm assists the business corporations and companies by providing the long-term debts to the middle market and the lower class middle market (LMM) companies. It also helps the middle markets by providing them with the equity capital and tends to commence its partnership with entrepreneurs, management organizations and reputed business companies and it normally grants the financing alternatives within its lower-middle-market profile (MSCC, n.p.) Such classes of companies normally generate $10-$150 million per annum and the long term debt investments are made for the companies greater than the lower-middle-market companies with respect to their business capital multitude. It seeks to bridge financial hole and the gap between LMM businesses and the investment and revenue generations. With the expanse of the MSCC, the company has debt and invested in almost 59 LMM companies till the Fall, 2012. At the end of the year 2012, the Middle Market scenario of the investments had risen up to 85 companies in total. The basic business strategies are categorized as follows 1. Delivery of the customized solution of financial problems in the LMM market. 2. Focusing and assisting the newly established companies. 3. Invest to help multiple companies, Business firms, industries, Regional and capital markets by strictly following a pre-defined investment criteria. 4. Leveraging on strong finance sourcing groups. 5. Lower rates of debts as compared to other debt companies and banks and providing benefit from long term, fixed capital and lower capital financing. (MSCC, n.p.) Owing to the expanse in the business and the investments, financial decisions, debt planning and managing the total expenditure per annum is ofcourse a very risky job and it renders the streamline of the company vulnerable to loss exposure and other risky situations. Following are the risk factors which could be predicted stochastically on the basis of the firm’s performance and subject to the economic and investment constraints, business structure and the competition with other business investment funds. The sinusoidal behavior of the economic conditions of US could be catastrophic to the performance of the firm. This rise and all in the country’s economy renders the operation of the company very risky and will obviously down trod the portfolio of the firm. Managing and deploying the capital with proficiency Competitions with other firms Referral conditions, relationships, and the maintenance of such relationships by managing and pacifying all the cliches and the rifts between client and our firm. It could be risky Rules and regulations governing the working of the firm and adversely affecting the way in which the firm rise its capital. Money borrowing business. So the potential for the gain or loss is amplified and so is the risk of investment on the company Subjugated to the SBA authority regulations because of the licensing issues. Insurance rules in Germany Germans believe in the quotation “Better safe than sorry”. Germany is the forefront of technology trade and hence it is also a scientific hub. Because of the advance living standards of the people and the impact of technology on the life of a common man, Germany is a very lucrative place for commercialization and industrial businesses. Germans are quite concerned about the wealth and the per annum capita of the plans and the policies in which they operate throughout the year. Hence the need of securing the investments from any mishap is quite a thoughtful topic there. The types of insurances in Germany are mostly concerned with three aspects: work, house and vehicle. One such type is Legal Insurance. It covers all the cost of trails and hearing except the charges and fines after proven guilty. Moreover it accommodates the expenditure of the lawyer and also the fee of experts. The legal insurance is a beneficial method to secure one’s own income if in any situation of mishap occurs, you may find an ease to deal with the situation. For example if you are a fond of bi-cycling, you must know that the bi-cycle theft is very common in Germany. Hence your vehicle must be insured to be reimbursed in case of the theft. The legal assistance insurance is a common practice there. The German legal system is somehow different for the newly established citizens and it also differs from the local traditions. Misunderstandings within the business firm, with the employees, disagreement with the landlords, local traders and business partners happen so often in that place. Legal Insurance of assistance could save a personal from a lot of personal fatigue and the loss of money in this manner. The insurance allows you to file a case in case of dispute and without even knowing whether you will win or lose, it helps you assist throughout the course of the trial and hearings. Rules for life insurance: Life insurance is an inexpensive insurance but it has some of its own rules and regulations. 1. The cost is based on the age of the insuring person at the start of the insurance term 2. The cost is also based upon the health history of the person. 3. It depends whether a person is a smoker or addicted to any drugs at the time of insurance or before long ago. That’s why it varies with the present status of the person. Rules for Travel Annual Insurance: 1. All the members of the family must be included in the insuring scheme irrespective of their age. 2. The annual travel generally varies from 31 to 43 days, but in case you wish to spend a longer time in some place, this must be informed before the start of the trip. 3. The scheme also covers the overall reimbursement cost in case of a valid reason for the inability of travel which results in the cancellation of the travel plan. 4. It supports Travel Health Insurance in case of any emergency or transient illness during the journey 5. Also includes the travel luggage allowance Insurance Operations and the Analysis of the Evolution of Insurance in India India is the world’s 19th largest insurance policy market in the world. Recent advancements in the economic growth and national wealth stability incorporating with the boom of Information Technology research and development in India has made the country a powerful and dominant leading market of the future. Combined with the population of one billion, the insurance policy story in India has gone through a two-step transformation. Before the year 1956, insurance was a private matter having no or very minimal amount of state intervention. On 1956, the insurance of life was nationalized with a created monopoly. General insurance was commercialized in 1972 and it also had a different substructure as compared to the life insurance (1956). The private sector of the industry was allowed to be incorporated in the general insurance policy in the year 2000 after a series of thoughtful negotiations at governmental level with a restriction that no more than the twenty six percent of the shares or the ownership of the industry could be subjected to any foreign agency or any non-Indian citizen individual (Sinha, 639-640). Insurance Regulations: Insurance Regulatory and Development Act 1999. This is a modification in the old 1938 Insurance act with some slight modifications or amendments. It refers back to 1938 act wherever the recent document is insufficient to provide the necessary information. The following are the regulatory procedures of this act: 1. It specifically explained the foundation and working of an Insurance Committee which sets the standards and the rule and regulations. 2. For those people who are opting for life insurance, the actuary who is appointed (actuary: member of the Actuarial society in India) must be the organizational employee. He/she might be in external advisor/consultant if the insurance type is non-life insurance. 3. The agents handling the insurance scheme must be having a high school diploma and almost a 100 hours of training from a nationally recognized and reputed institution. 4. Life insurers are asked to understand and observe the ration of solvency i.e. the ratio of the quantity of available margin to the amount of the desired marginal solvency. The mathematical reserves and the total sum risk plus the overall belonging (assets) of the policy holder. 5. It gives the details of insurer whereabouts and details of queries required for the registration and the renewal of the agreement. To renew the policy, one must pay a fee of1/5th of 1% of total capital which is written direct from the insurer in India at the time of agreement and the present financial year of that time. It intends to provide an explanatory overview for each of thefollowing key personnel chief executive, CEO chief marketing officer, CMO appointedactuary agent, In charge investment officer In charge of internal audit Financeofficer. 6. The relevant details of the insurance advertisement published in the papers and the electronic media must be informed and reported to the Insurance Regulatory and Development Authority (IRDA). 7. All insurers are ordered to pay a lump sum amount for the coverage in the rural areas (IRDA, 2-6). Political Risk on Governmental Level Country: France France generally offers a feasible and encouraging environment for the business initiative. Socialist Party (PS) holds power there. The recent party has tried to improve the social imbalance among the different classes of people which was a greater problem in the former governmental rule. However France is also under the potential rift with the Austerity German government (BERI, n.p.). The labor activism and the protest regarding the issues of income, salary and payment procedures on daily basis could be a noticeable challenge before the start of the thought to establish business in France. Some sectors of business could be adversely affected by such activities. Also the ownership of the companies are possessed by the formerly state-owned companies and the recently newly formed governmentally owned companies. Here labor activism could be used by the opposition too infuriate the trouble mongers against the present government which might result in the riots. One more problem which hinders the commencement of business in France is the bureaucracy and it could be devastative in the business of insurance companies. Because of the bureaucrats’ multitude of bank balance and the vast property, it is very difficult for our company to accommodate such heavy and rich class. This could be catastrophic in consequence in the case of any terrorism, legal proceedings, killings and theft or blunder etc. This might disturb the streamline of the relationship between United States and the French government. Political Risk on Governmental Level Country: India India is discussed so often in the recent affairs of world and it has also an unfortunate contribution in the corruption scandals. However it is noticeable and must be appreciated that it is not an altogether corrupted nation. Prime Minister Manmohann Singh from the Congress party is managing the social and governmental affairs. The major rivals of the Congress is the Bharatii Jannata Party (BJP) and has strongly opposed the role of congress yet they are unable to elect a prime minister who is equally appropriate and being selected by the general people. With the recent advancement in the field of information technology, the India became the forefront of the IT industrialists and Import/Export hub of the technology. It is feasible for the tech-oriented business and software industry. The research and development in the Indian Institute of technology (IIT: World rank 26 for quality of education, founded by the former prime minister Jawahar Lal Nehru) is commendable and it is the main source of the eruption and spreading of the Computer professionals and entrepreneurs. However setting up the insurance business by our country, besides all the positive and encouraging aspects, has one major drawback: the economy shift. India’s economy is not very balance or in stable condition. It exhibits an up-down behavior. Another problem is that India had been the target of terrorism in the past referring to the Mumbai attacks and the attack on the Parliament. The Hindu-muslim riots unfortunately a significant role in shaking the overall image of India in front of the European and American states. Referring to the business commencements and the economic and terrorism situation, this could be a risk or might be a threat to the harmony of the political relations between U.S and India. Proposed Remedy and Risk Manipulation Owing to the circumstances of the business and the amount of risk we encounter, once again there is a need to state the above mentioned risks and to propose a mitigating solution to the problems. The afore-mentioned risks are: The sinusoidal behavior of the economic conditions of US could be catastrophic to the performance of the firm. This rise and all in the country’s economy renders the operation of the company very risky and will obviously down trod the portfolio of the firm. Managing and deploying the capital with proficiency Competitions with other firms Referral conditions, relationships, and the maintenance of such relationships by managing and pacifying all the cliches and the rifts between client and our firm. It could be risky Rules and regulations governing the working of the firm and adversely affecting the way in which the firm rise its capital. Money borrowing business. So the potential for the gain or loss is amplified and so is the risk of investment on the company Subjugated to the SBA authority regulations because of the licensing issues. The first mentioned risk could be manipulated as offering the varying packages among different class of people. As it is clear from the discussion that a normal person insurance is far different from the Industrialist insurance. The amount of insurance also varies. Hence by providing different packages in different categories the economic effect could be pacified. Also an attempt must be made to sign an MoU between government and the company to support at the time of need Competition could be won by providing the policies which sound attractive not only to a common man but it also allures the business class and the industry to become policy holders of our company. By offering a reasonable amount for the payment of the insuring amount and by offering long term debts so that it might not put a client in a limbo to decide whether to attain the insurance or not. Money Borrowing must be prolonged in episodes and payment procedures must be proposed with some easiness so that if any mishap occurs the damage could be balanced and reimbursed by both sides. We cannot deal with the situation of the referral conditions and the subjugation to the SBA authority because these are the lawful implications and they are to be followed in order to avoid any legal action against the firm. However by dealing with the rest of the situation by following the proposed methods or any newly adapted techniques we could make our firm a stable and profitable organization. Conclusion This report discusses the policies and the working of the Main Street Capital Corporation and the business plans including the analysis of the insurance policies in the countries other than United States. The report points out the basic implications faced by the company in U.S and henceforth it proposes a remedy to solve such problems. The initiative and the analysis of the different countries business climate is also discussed in detail and a perusal on the political risks in commencing or expanding the business in these countries is also being debated and summarized. It finally ends with some proposed solutions and summarizing the aspects being discussed throughout the report. Work Cited BERI. "Business Risk Service (BRS):France." Business Environment Risk Intelligence. BERI, 2013. Web. IRDA. The Insurance Regulatory and Development Authority Act, 1999: With Short Notes. Delhi: Universal Law Pub. Co, 2000. Print. MSCC. "History." Main Street Capital Corporation. N.p., n.d. Web. 18 Sept. 2013. . Sinha, Tapen. "An analysis of the evolution of insurance in India." Handbook of International Insurance. Springer US, 2007. 639-676 Read More