Tuesday, June 11, 2019

International Market Expansion Essay Example | Topics and Well Written Essays - 1500 words - 2

internationalist Market Expansion - Essay Exampleper prevailing accounting standards, all firms must translate their foreign currency word pictures in local currency in order to represent them on their balance sheets. This exposure normally arises when a parent company needs to convert the liabilities/assets of its subsidiary company in its balance sheet. The risk arising as a result of this translation is termed as translation exposure. (Wang, 2009)It actually measures the sensitivity when the assets or liabilities of Citibank are actually liquidated callable to fluctuations in currency exchange rate. Transaction risk and exposure arises when they are liquidated and hence may gain or lose value in the shape of conversion. It is critical to note that transaction exposure do not create any impact on the cash flows of the firm whereas transaction exposure does run through an impact on the cash flows of the firm. International firms therefore have to consider this aspect into acco unt also.Translation exposure often arises due to recording of items on the balance sheet therefore Citibank can engage into standards balance sheet hedge in order to safeguard themselves against any changes in the values. Transaction exposure can also be arranged by entering into foreign exchange derivatives. Citibank can actually manage its transaction exposure by entering into away and future exchange rates with counterparties. Foreign currency swaps as well as other more sophisticated instruments may also be apply to manage transaction risk. More specifically, Citibank however, need to define risk limits against each currency besides forming policy regarding counterparties. This will actually allow Citi Group to manage counterparty risk associated with the parties with whom it actually enters into foreign currency transactions. (Riad A. Ajami & Goddard, 2006)1. International banks tend to facilitate international trade and to ensure the movement of goods and services across p olitical borders. International banks though not deal in goods but provide

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.