Question

QUESTION 8 What unique features bring the managing of financial transaction in international business? What should be the appropriate proactive preparations? Provide examples

Answer 1

Multinational finance, international finance us additionally concerned with matters of international financial management. Investors and multinational corporations must assess and manage international risks such as political risk and foreign exchange risk including transaction risk, economic exposure and translation exposure. While dealing with international business the important points to be considered are:

1) Foreign currency translation: The interest rate differntials, inflation rate differentials, higly fluctuating exchange rates, changes in taxation policies.

2) Mode of financing: One has to choose how to deal with method of financing like letter of credit, consignment, factoring, debtors financing, prepayment, barter, euro issues, external commercial borrowings, euro bonds or depository receipts.

3) Foreign market research: Global corporations will have to face political risks, economic risks, exchange risks. For eg: Examples of political risk are banning of products to cater to local demand, levy of additional taxes on profit, restrictions on employment of foreig managerial/ technic personnel, expropriation.

4) Taxation: When it comes to international portfolio investment, taxes are both an obstacle as well as an incentive to cross border activities. The Double Taxation Agreement Treaty must be considered and studied before entering into a financial transaction internationally.

Hence the whole process of contract entered, exporting, licensing, franchising, social and corporate environment must be looked before entering in international business.