B.BCIN.V.21.WS23 Multinational Finance and Risk Management (WP)* ILV - 1
Multinational Finance, Evaluation the
Opportunities, Costs, and Risks of Multinational Operations 6th
Edition, by Kirt C. Butler (Wiley Finance)
This course will introduce students to the essentials of international finance, asset allocation, and financial & risk management.
When conducting any business model on an international stage, financial managers and their companies must deal with the very real consequences of operating cross-border. This entails a myriad of international financial risks (such as currency risks in receiving revenue streams, or undertaking financings in different currencies other than your home currency), and political risks (risk that the business environment in a host country will unexpectedly change due to political events). These consequences require a die-hard mindset for risks, and risk management, which is how we will approach each chapter. The students should put themselves into the shoes of the financial manager, and ask themselves not only what is it, but what is the risk thereto, and what is the impact of that risk if not mitigated?
We will also look at the many opportunities of operating a multinational company from a cost of capital, economies of scale, and business opportunity perspective; and we will quantitatively understand these benefits. Students will obtain a critical view of the international financial landscape, from government regulation, to competition, to market behavior – as well as the many unique and innovative tools that exist today for financial managers to manage these risks more effectively (the derivatives suite in action! options, futures, & swaps). We will look at real life case studies to understand the effect that each financial decision has on capital structures, costs of capital, and business strategy – and we will even look at an international version of the world-famous Capital Asset Pricing Model (CAPM). Should I invest? Put CAPM to the test!
Toward the end of the course (and in addition to a continuous exam format), students are asked to work in groups to create their own international company. They will choose its attributes, where they will do business, and how they will manage its international risks (as well as how to capitalize on its international opportunities). A final presentation will provide students the opportunity to showcase their raw understanding of how to financially manage an international business.
Lastly, we will place a special emphasis on risk management. Risk management is not only important in multinational finance, it has a critical utility in everyday life. Most decisions can be supported by a strong mindset for risk management – even if polished off by that extra “x” factor that makes us human – which is how you feel. Students are challenged to ask the right questions in all situations they encounter. If I do this, what happens (risks – good and bad)? How likely is it to happen (probability)? If that happens, what is the impact, and can I handle the impact (risk appetite), or am I getting in over my head (risk aversion)? Hey, what’s the worst that could happen (worst case scenario/reverse stress testing)? Most importantly, what if I don’t do it? (what do I miss?). Consistent, calculated risk management is highly effective, brings about clarity, and reduces stress. We will discuss these questions primarily in a financial context, however several examples will go off-road in order to explore the fundamental mechanics of developing and sharpening your risk management mindset.
- Teacher: Jason Forbes