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Multinational Business Finance - Essay Example

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Summary to essay on topic "Multinational Business Finance"
Our company is a multinational enterprise (MNE) operating in a challenging global environment. Doing business over a wide geographical reach has benefits, but it exposes MNEs like us to risks associated with raising capital that constantly threaten to increase costs, lessen profits, and make the work of maximising shareholder value difficult…
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Download file "Multinational Business Finance" to see previous pages... These risks arise due to the unavoidable effects that some political and natural events have on currency exchange and interest rates. When one of the countries where we operate slides into an economic crisis, for example, government might impose exchange or currency controls, affecting our cash flow,
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profits, and funds transfer mechanisms and creating potentially adverse effects on our finances and stock price.
These risks arise both from the likelihood that something good will not happen or that something bad will happen (Read and Kaufman, 1997, p. 112). Financial risks are those that threaten the efficiency of the worldwide movement of money and profits amongst our affiliated companies through internal transfer mechanisms (Shapiro, 2003, p. 26). We are exposed to this risk that have several types, amongst which the most relevant given the events just outlined are currency, credit, inflation, and market risks. Although most of the critical events are non-political in nature, their effects on the respective national economies may cause political risks that we must address.
Our cost of capital and debt is affected by fluctuations in exchange and interest rates, inflation, and stock market volatility. ...
112). Financial risks are those that threaten the efficiency of the worldwide movement of money and profits amongst our affiliated companies through internal transfer mechanisms (Shapiro, 2003, p. 26). We are exposed to this risk that have several types, amongst which the most relevant given the events just outlined are currency, credit, inflation, and market risks. Although most of the critical events are non-political in nature, their effects on the respective national economies may cause political risks that we must address.
Our cost of capital and debt is affected by fluctuations in exchange and interest rates, inflation, and stock market volatility. We also need to manage transaction exposures, the possibility of incurring gains or losses on sales, purchases, and investment decisions entered into and denominated in foreign currencies (Eiteman et al., 2004, p. 155-176).
International Finance Strategies
Risks are uncertainties and sources of anxiety we need to deal with. Most business and financial risks are caused by outside events and changes in economic variables (GDP growth, commodity prices, interest rates, foreign exchange rates, and stock prices) over which we have virtually no control (Froot et al., 1994). Our inability to control these events, however, does not mean we cannot manage their effects.
We manage the consequences of financial risks by adjusting our operational, financial, and investment strategies. Some risks we can take and others we cannot.
We monitor and evaluate those risks we can take, like expanding in a growing though quirky Brazilian market and the volatility of worldwide stock markets. Some of our strategies in the ...Download file "Multinational Business Finance" to see next pagesRead More
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