International Risk

In: Business and Management

Submitted By noelani
Words 448
Pages 2
International Risk Paper
Celeste Moniz
FIN 320
Philip Celestin
October 10, 2011

There are a lot of risks that is involved with any capital project where a firm is thinking of investing. International capital projects have additional risk and issues that needs to address. Two of the biggest international investment concerns are the exchange rate risk and political risks. Another risk that may be an issue with international investments would be economical risks. Descriptions of these three risk factors will be explained. The exchange risk has mostly to do with the exchange rates in that certain country where a project is thinking of opening. Exchange rates are very unpredictable. It is possible that the exchange rate will be different tomorrow than it is today. The currency from different countries is traded in a large scale on a currency market that is similar to stocks, bonds, and other commodities. The market is very active with trillions of dollars that is traded daily. The fluctuation in value is an additional risk when making investments in other countries. The second of the biggest risk is called the political risk. Political risk deals with political conditions in that country of interest. This could negatively affect the profits from foreign investments. When making investments in foreign countries, close attention to the political climate, local laws, local perceptions of the company’s home country, and the social unrest in the targeted country. Ethical considerations such as bribery, child labor, and subsistence pay must be taken into account. Before investing in another country, political climate and local laws must be considered. How local governments treat foreign companies need to have special attention. Firms also have to know what laws is required to follow while operating in that country. Ethical considerations also become…...

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