Country Risk Analysis

2682 words - 11 pages

Country Risk AnalysisStar Jeans Company, in its quest for international exposure, must perform an initial country risk analysis for Brazil. The country risk analysis will examine the economic, translation, and transaction exposure along with the political, socio-economic, and environmental risks pertinent to Star Jeans Company expanding into Brazil. Star Jeans Company will also use various analysis techniques to mitigate the risks identified in venturing into business in Brazil. The results of the analysis will be interpreted using qualitative and quantitative techniques that will allow Star Jeans Company to prepare to make a direct foreign investment decision.Economic ExposureThe main concern with economic exposure is that it affects the value of the company's cash flows through the fluctuation of foreign exchange rates. Star Jeans Company is looking into expanding to Brazil; therefore, it must pay close attention to the exchange rate fluctuations of the U. S. dollar (USD) and the Brazilian real (BRL). Managers at Star Jeans Company will need to hedge economic exposure if they decide to expand into Brazil. As stated in Investopedia, many international companies are significantly uncovered to economic exposure. (2007). Star Jeans Company's cash flows are at risk of being affected by exchange rate fluctuations, in this case fluctuations of the BRL. Star Jeans Company's strategy must include the consideration of selling future foreign currency, equal to the company's current net revenues in foreign currency.One way of achieving this is by participating in the foreign exchange market (Forex or FX) where currencies are traded. "The overall forex market is the largest, most liquid market in the world with an average traded value that exceeds $1.9 trillion [USD] per day and includes all of the currencies in the world" (Investopedia, 2007, 1). In addition, forex is a seamless 24-hour market as the locations in Sydney, Japan, Singapore, London, and New York provide different time zones. These different time zones give traders the opportunity to closely manage their investments and respond to favorable and unfavorable developments with immediate trading opportunities. As Star Jeans Company prepares for the decision to expand into Brazil, it will study and consider the forex market as a hedging strategy to minimize economic exposure.Translation ExposureOne of the major risks of investing in foreign territory is translation exposure. According to Investopedia, translation exposure, also referred to as accounting exposure, is defined as "the risk that a company's equities, assets, liabilities, or income will change in value as a result of exchange rate changes" (2007, 1). Of course, it is impossible to anticipate any significant changes in the foreign exchange rate; however, it is possible for a firm to overcome such changes, to some extent. One of those methods is to use a money market hedge, which is "borrowing and lending in multiple currencies, for...

Find Another Essay On Country Risk Analysis

Country Risk Analysis: India and Brazil

3098 words - 12 pages IntroductionWhen making the decision to invest in a foreign country there are several measures that need to be taken and perhaps the most important measure is the risk analysis. By conducting a risk analysis the investor is able to predict future cash flows and earning potentials as well as make smart investment decisions based on the country's current state. In this case the US based manufacturing firm is trying to decide whether to build

Country Risk and Strategic Planning Analysis Paper: Target

2136 words - 9 pages Many U.S. company's are looking to become part of the global market by either building in foreign countries or purchasing existing companies and then changing it to the U.S. company name. To do this the company must do an analysis of the risks involved in the chosen country and develop a strategic plan that will work for everyone involved as an acquisition progresses. This paper will look at the risks and assessment of Target, Inc opening a

Country Risk Analysis – Czech Republic

1054 words - 4 pages government resign. On the other hand, potential political changes would probably not affect Texas Instruments and their investments a whole lot because all major political parties are committed to support the FDI into the country. Therefore, regardless of who is in power the favorable economics situation is likely to sustain.Another reason why to prefer investing into the CR over any other country is low investment risk. The international credit

Country Risk and Strategic Planning Analysis Outline

1574 words - 6 pages Comprehensive Environmental Analysis pg. PAGE 1 BrazilBrazil, the world's fifth largest country in geographical expanse and thelargest nation in Latin America, comprises slightly under half the land mass of the South American continent and shares a border with every South American country except Chile and Ecuador. The size of the continental United States excluding Alaska (Culture of Brazil, 2009).Regional Analysis Alliances:a. Mercosur

Argentina risk country

4205 words - 17 pages events contribute to companies' operational risks. This term is also sometimes referred to as political risk; however, country risk is a more general term that generally refers only to risks affecting all companies operating within a particular country.Political risk analysis providers and credit rating agencies use different methodologies to assess and rate countries' comparative risk exposure. Credit rating agencies tend to use quantitative

Country Risk and Strategic Planning

3498 words - 14 pages The purpose of this paper is to inform the reader, of the American Cheese Company who has recently conducted a strategic risk analysis to determine how the company would handle some possible risks for the new global business venture. The research team for American Cheese Company on assessing the country of Ireland as well as other global business ventures reported these risk evaluations. Political systems have a huge impact on today's global

Red Bull Inc and the Country Risk/Strategic Planning for Argentina

3652 words - 15 pages in restoring confidence and regaining control from corruption. Early reforms of the Supreme Court and police have lost momentum and have caused the government to move more cautiously going forward. Probably the most immediate regulatory risk to businesses is due to mandated price agreements used by government to combat inflation (Viewswire: Argentina, 2006).Red Bull sees Argentina as a country poised for a great economic turn-around. Indicators

Political and Country Risk

688 words - 3 pages 2. Identify common financial factors for an MNC to consider when assessing country risk. Briefly elaborate on how each factor can affect the risk to the MNC. When considering assessing country risk, common financial factors such as interest rate, exchange rate, inflation, industry competition and industry growth are important elements that drive the country risk. Interest rate: as a fact the money could be spent or saved, when interest rates

Hanes, Country Risk and Strategic Planning

1693 words - 7 pages Economic and political risk for Hanes has always been a major factor in the international commerce based on the inescapable differences between policies, laws and customs of the governments in which business is being performed. Hanes, as an outsider going into a new market/country often faces lack of knowledge about the local market, the culture and often has to relay on outside sources to forecast. Hanes frequently characterizes the political

Foreign Direct Investment: Country Risk Assessment of Spain

5343 words - 21 pages the mercantile and industrial revolutions caused the country to fall behind Britain, France, and Germany in economic and political power. Spain remained neutral in World Wars I and II, but suffered through a devastating Civil War (1936-39). In the second half of the 20th century, it has played a catch-up role in the western international community. Continuing concerns are large-scale unemployment and the Basque separatist movement.  &nbsp

Argentina Economic Risk

689 words - 3 pages ) points out, there are a few techniques to assess country risk such as: checklist approach, Delphi technique, quantitative analysis, inspection visits, and a combination of techniques. Furthermore, a combination of the checklist approach and quantitative analysis were used to determine economic risk. In addition, comparing risk ratings among countries is an effective way to measure country risk (Madura, 2010). After analyzing the different factors

Similar Essays

Country Risk Analysis

2499 words - 10 pages The present risk assessment work emerged from my interest in the BRIC countries and the fact that they represent a big part of the world’s economic potential. In the following analysis I will focus on the main economic, political and financial risks in Russia. Russia is the largest country in the world in terms of area and the world’s ninth most populous nation with 143 million people. Due to its large area the country is situated in 4

Country Risk Analysis Japan

2685 words - 11 pages There is a certain level of risk for any company associated with globalization. While globalization provides many benefits there are many risks as well. Proper research will assist a business's desires to go global but a solid international marketing plan and a sound relationship with the business members of the foreign country will provide the best outcome for the companies involved. The governmental bodies of countries reign on the decisions

Country Risk And Strategic Planning Analysis

1775 words - 7 pages Many companies are looking to expand their markets from one country to another. In order for a company to become successful at implementing a new product or service into another country the company must first do an analysis of all the risks involved in the chosen area and develop a strategic plan that will work for all parties involved. This paper will analyze the risks involved in implementing mining conveyers into the country of

Country Risk And Strategic Planning Analysis Paper

2896 words - 12 pages IntroductionSuccessful businesses venturing into foreign markets establish a Country Risk and Strategic Planning outline to ensure potential problems are addressed to prevent such failures. In our paper, we discuss the country risk analysis of Canada. We expect O2 Inc. to grow into a global business. O2 Inc. will offer fresh oxygen for customers to relax and help improve their health. The paper analyzes how we will break down risks for