International Financial Management

International Financial Management plays an important role in the Indian economy, with FDI’s,

FFIs and FIIs playing a key role in the stock and capital markets. International financial

management also known as international finance is a popular concept which means management

of finance in an international business environment, it implies, doing of trade and

making money through the exchange of foreign currency. The international financial activities

help the organizations to connect with international dealings with overseas business partners-

customers, suppliers, lenders etc. It is also used by government organization and non-profit

institutions.

It affects all aspects of economic activity. The activity can be in the form of individuals making

asset selection decisions, firms taking financial management decisions, fund managers deciding

on which markets to deploy funds in and when to exit the markets. Government deciding to raise

funds, central banks dealing with a consistent decline in foreign exchange reserves, a financial

crisis, a surplus of foreign exchange reserves, or commercial banks making asset-liability

decisions.

Every firm is confronted with four financial decision making areas, namely investment decision,

financing decision, dividend decision and working capital management decision. Decisions

regarding where to set up a new plant (investment decision), what the capital structure should be

and where finances should be raised (financing decision), whether dividend should be paid or not

(dividend decision), how much cash to hold, in what currency should receivables and payables

be denominated, what the sources of short-term funds are (working capital management

decisions), are areas in financial management, for which standard evaluation techniques and

management methods exits.

Thus international finance management enters decision making in numerous ways. Regardless

of whether it is a domestic firm, with import and export transactions, or a Multinational

Corporations (MNC) with a number of subsidiaries, associates and branches in different parts of

the world. International Financial Management is often discussed from the perspective of the

Multi National Corporation because it has to contend with political risk and exchange rate risk in

numerous counties on a daily basis.

Role of International Finance Manager

Taking investment Decision

• Minimizing risk

•Hedge against foreign exchange exposure

Risk Handling in Foreign operation

•Default Risk

•Political Risk

•Economic Risk

•Piracy, sea pirates, accident insurance

•Financial Risk

•Business Risk

•Foreign Exchange Risk

Risk Minimization

•Understanding various risk minimizing instruments

•Understanding the risk associated with foreign exchange rate fluctuation

Understanding of Risk Associated with the Exchange risk

•Transaction Risk

•Operating and Strategic Risk

•Translation Risk