International Management at MNCs2.3 Tools and method of management – Translation Exposure – difference between exposed assets and liabilities – Fluctuations in foreign exchange rates – F
Trang 1CHAPTER VI: INTERNATIONAL FINANCIAL MANAGEMENT AT MNCs
1 Multinational Corporation
2 International Management at MNCs
Trang 21 Multinational Corporation
1.1 What is MNCs?
A corporation that has its facilities and other
assets in at least one country other than its
home country They have offices and/or factories
in different countries and usually have a
centralized head office where they co-ordinate global management
1.1 What is MNCs?
A corporation that has its facilities and other
assets in at least one country other than its
home country They have offices and/or factories
in different countries and usually have a
centralized head office where they co-ordinate global management
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Trang 31 Multinational Corporation
1.2 Characteristics
• Centralize ownership
• Use a wide and vary range of resources
• Often chase after global management strategy
Risk
1.2 Characteristics
• Centralize ownership
• Use a wide and vary range of resources
• Often chase after global management strategy
Risk
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2.1 Concept
Manage and mitigate risks in transferring of
financial products and services between
countries, intercompany, bilateral or
multilateral
2.2 Manage Risks
- Risks in transaction (A/R, A/P, )
- Risks in fluctuation (inflation…)
- Risks in investments
2.1 Concept
Manage and mitigate risks in transferring of
financial products and services between
countries, intercompany, bilateral or
multilateral
2.2 Manage Risks
- Risks in transaction (A/R, A/P, )
- Risks in fluctuation (inflation…)
- Risks in investments
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2.3 Tools and method of management
Each system has there own costs and risks
investment to ensure the profitability
2.3 Tools and method of management
Each system has there own costs and risks
investment to ensure the profitability
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2.3 Tools and method of management
– Translation Exposure – difference between
exposed assets and liabilities
– Fluctuations in foreign exchange rates
– Fluctuations in real value of firm in long-term
book value of MNC
2.3 Tools and method of management
– Translation Exposure – difference between
exposed assets and liabilities
– Fluctuations in foreign exchange rates
– Fluctuations in real value of firm in long-term
book value of MNC
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2.3 Tools and method of management
How to mitigate risk?
- Buy and sell of Forward, Future contract
- Use strong currency in contract (less fluctuate)
- Accept payment or storage of currency that is
expected to be valuated
- Other instruments
2.3 Tools and method of management
How to mitigate risk?
- Buy and sell of Forward, Future contract
- Use strong currency in contract (less fluctuate)
- Accept payment or storage of currency that is
expected to be valuated
- Other instruments
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2.3 Tools and method of management
financial instrument is bought or sold at the
market price (spot price) as on today (date of
making the contract), but is to be delivered on a stated future (forward) date in settlement of the
contract
2.3 Tools and method of management
financial instrument is bought or sold at the
market price (spot price) as on today (date of
making the contract), but is to be delivered on a stated future (forward) date in settlement of the
contract
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2.3 Tools and method of management
The use of borrowing and lending transactions in foreign currencies to lock in the home currency value of a foreign currency transaction
Incase, home currency of importer is devaluatig compare to exporter’s one, he/she will try to pay promptly But if the home currency is valuating,
2.3 Tools and method of management
The use of borrowing and lending transactions in foreign currencies to lock in the home currency value of a foreign currency transaction
Incase, home currency of importer is devaluatig compare to exporter’s one, he/she will try to pay promptly But if the home currency is valuating,
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2.3 Tools and method of management
Offsetting exposures in one currency with
exposures in the same or another currency,
when exchange rates are expected to move in
such a way that losses or gains on the first
exposed position should be offset by gains or
losses on the second currency exposure
Can be used in combination group of currency
that have similar fluctuation or one weak
currency and one strong currency
2.3 Tools and method of management
Offsetting exposures in one currency with
exposures in the same or another currency,
when exchange rates are expected to move in
such a way that losses or gains on the first
exposed position should be offset by gains or
losses on the second currency exposure
Can be used in combination group of currency
that have similar fluctuation or one weak
currency and one strong currency
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Trang 112 International Management at MNCs
2.3 Tools and method of management
Increase price when domestic currency is
devaluated
will help to cover any loss
2.3 Tools and method of management
Increase price when domestic currency is
devaluated
will help to cover any loss
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2.3 Tools and method of management
Exchange of periodic interest payments between two parties (called counter parties) as means of exchanging future cash flows
2.3 Tools and method of management
Exchange of periodic interest payments between two parties (called counter parties) as means of exchanging future cash flows
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2.3 Tools and method of management
Simultaneous buying and selling of a currency to convert debt principal from the lender's currency
to the debtor's currency
2.3 Tools and method of management
Simultaneous buying and selling of a currency to convert debt principal from the lender's currency
to the debtor's currency
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2.3 Tools and method of management
2.3 Tools and method of management
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Trang 15Discussion questions
1 What is Multinational companies?
2 How to manage risks in the MNCs?
Listed few tools and techniques of the
MNCs.
1 What is Multinational companies?
2 How to manage risks in the MNCs?
Listed few tools and techniques of the
MNCs.