Week 5 Assignment

Please reword these paragraphs in your own words. Do not use the same words as in the paragraphs. Thanks.

Major Risk Exposures and Mitigation

  • 1-Risk exposures of multinational companies and techniques to overcome: 
    • Political problems: 

Political risks such as regulatory or nationalization programs and imposing laws preventing capital movement. The risk could be minimized by in-depth research to setup a company and political risk insurance may be handy. 

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  • Financial factors: 

Economic environment may disturb interest rate, exchange rates, and wages due to random movements. Adoption of flexible sourcing policy and formation of strategy to manage risks such as foreign exchange rates helps a lot. 

  • Competitions: 

Competitive technology and courses of competitor’s actions would be a challenge to a smooth flow of business. Rival competition may include cyber attacks and could be tackled with proper knowledge in technological advancements 

Exchange rates and its effects on MNC’s profits:     

The fall of value in currency exchange rates could disturb MNC’s in a tremendous way by lowering its profits. Exchange rate initially affects corporation’s cash flow through economic exposure risks, and translation risks. To minimize risk, MNC’s must may and aware of the behavior and effects of exchange rates. Fixed exchange rate system is constant, fluctuates less comparatively, and helps in direct foreign investments. It also helps to convert foreign earning into home currency without disturbing its value. 

Financial Management

  • 2-In rereading chapter 1 the part regarding why study finance stood out to me most.  It is very true that you need to understand finance no matter what type of job you are looking to make your career.  In the chapter it shows three job postings that all require financial knowledge yet neither of those positions were in a financial role or field.  I can confirm this as I have on numerous occasions done job searches within my company and when I type the keyword of finance, it pulls up jobs in many other areas like marketing and contracts and program management.  Everyone needs to have a sound knowledge of financial management to make it in the business world.

Please answer these paragraphs like you were talking to these people face to face. Please do not use the same exact words use your own words.

3- I’ve worked in the financial field at Prudential as a financial associate and over 6 years in banking and it was very clear in those fields how extensively necessary finance was.  In the case of the bank during the economic crisis that saw many banks closing ours did as well simply because it managed it’s assets and debt very poorly.  For instance for much of our last few years we usually offered among the top 10 rates on CD’s in the country.  Once the economic downturn started happening and our loans started not performing we quickly found those Cd’s at over 5% APY were unsustainable.  Especially once the corporate properties rapidly devalued.  Even in the other organizations they all have a CFO or controller or both for larger organizations and they are largely responsible for keeping the ship running smoothly.

4- Every company has a financial position of some sort and those who have the knowledge and knowhow when it comes to evaluating and making financial decisions have the edge. This rings true even if your position is not directly related to finance have the knowledge will eventually payoff. As I progress through my career I notice how company decisions are made based on what makes financial sense for a company. Being in upper management requires one to have the ability to find way to increase production and reduce costs. When I brainstorm new ideas and methods for making the company I work for more profitable I have to keep in mind the financial aspect of those ideas.

5-Everyone needs to have a sound knowledge of financial management to make it in the business world.” There are so many people that don’t really know about financial management that are boss and supervisors and many times past their work off to the accounting departments. When they are the ones that are responsible for doing certain tasks. All because they do not know and don’t even care to learn.

6-I personally that the competition could be a major factor. When a company is exporting goods to another country for sale they need to take into account social factors of that country. I assume that if a product doesn’t work in that country it is not going to sell better than something made locally. For example, if ford were to start selling their larger F series trucks in Europe, they probably wouldn’t sell to well. This is because the social factors are that Europeans prefer a more conservative vehicle with higher gas millage.

  • 7-A good recent example of the how currency exchanges can hurt a countries ability to trade we can look at the Brexit.  Brittan exited the European Union and the Euro largely because it seems that the Northern half of Europe is basically keeping the Southern half from default and constantly negotiating debt.  While there are other political reasons what we’re interested is how this effects America.  For one thing we’re already seeing the value of the dollar grow rapidly over the pound.  Which means our exports to Brittan are now getting more and more expensive just because of this.  This means Brittan buyers could choose to buy elsewhere and save more money.

8-When making a Direct Forgein Investment a company would be getting involved in a long-term investment completely changes the perspective that I was looking at this chapter. I assumed that all this was short term and a company would be forced to stop importing and exporting whenever the exchange rate were to significantly affect profits in a negative way. How does a company predicts the exchange rate to make a company profitable in the future? I imagine this is way more difficult to predict than any stock prices.

 
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