RISK MANAGEMENT IN INTERNATIONAL BUSINESS
By CAMPBELL TIAN 4479657
Start a globe business relevant management of various and uncertain . Risks linked with the legal environment, politic, business environment, which show reality. Other risks come from law jurisdiction, due to international customers may not be the same laws and implementing mechanisms as their outbound suppliers. Knowing how to manege risk in international business can decrease the unessential looses.
With the positive of technology, transportation or communication has improve terrifically, thereby push the development of global trade. In the years of globalization, the bound between â€œoverseasâ€ ...view middle of the document...
its values were impacted by fluctuant changes when the Currency exchange processing.
The example of transaction risks
A JAPAN company got a loan of Â¥10 million for one year at annual interest rate of 3% in the globe financial market. After get the credit, the firm exchange Â¥10 million into $100000 at the currency exchange rate $1=Â¥100. After one year , the company needs Â¥103 to repay the Yen credit. If the Dollar and Yen exchange rate was $1=Â¥80, then this firm would pay about $802400 to buy Â¥100 million.
A companyâ€™s translation risks is impacted by exchange rate .Translation risk refer to the revaluation account of overseas capital that are held in a foreign currency since foreign currency exchange rate altering over time. That revaluation will create an exchange loss or gain.
Translation Risks Example
A singapore firm has $2 billion banking saving, the interchange rate is $1=Â¥5.14, which Worth 5.14 Billion Chinese Yuan. If the SINGAPORE dollar descend and Chinese Yuan upvaluation, the interchange rate are $1=Â¥5, then the $1 billion can convert to Â¥5 million. the account would descend to 140million RMB simultaneously
Economic risks (also known as operating risks)is the risk of a companyâ€™s market value changing from unexpected exchange rate fluctuations. When the coins interchange rate going up or down, the cost of production and sale price can be affected by the change which main turn affect profits.
Country Risk includes political risk and economic risk that may affect its businesses and result in investment losses
Political exposure can be consider as the risk of losses since the policy environment has modulated .like war, force coups ,trade barriers are all extreme examples of political risk.
Solution to risk management
creating a Foreign exchange risk management system and foreign exchange risk information platform.
In the international financial market volatility environment, as business managers must pay close attention to the development trend of international economy, to grasp the dynamics of financial markets, focus about the Government policy , analyzing of the...