Respond to:If you were the CFO of a multinational company, there are precautions that could be taken
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Respond to:If you were the CFO of a multinational company, there are precautions that could be taken in order to minimize international risk. Hedging can be done as a business may attempt to hedge their foreignexchange risks by buying futures in the currency market. This helps to reduce the risk that price movements in the currency market will affect the revenue and profit of the company. Purchasing political risk insurance is also another way to reduce the impact of international business risks. Multinational companies will outline their K annual filings with actions that they will take. Insurance can be purchased to protect from situations such as wars, terrorism, labor disputes, trade restrictions. Another thing that companies can do is to have operations in multiple countries because it provides international diversification Beers Companies can use cash flow to minimize political risk by stabilizing cash flows and to have liquidity as a priority to transfer cash anywhere if needed. This actions allows the possibility of distribution of investments to areas where profit is higher and the political risk is lower. The uncertainty needs to be reduced in finances and the foreign exchange risk as well by hedging or other ways. Proper allocation of the companys resources globally needs to be situated Phung
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