Once an international enterprise has a strategy for going international and an organizational structure for carrying out the strategy, managers must begin to arrange the resources the business will use to achieve the stated objectives and goals. The first resources a manager must secure are financial resources. These resources will be combined with human resources and material and equipment to produce products, which will then be sold to secure the additional financial resources needed to fuel the ongoing process of wealth creation.
The task of the international financial manager is to ensure a continuous flow of funds among the various subsidiaries and between the subsidiaries and the headquarters sufficient to carry out the MNC's operations. Translating human efforts and goals into financial plans is always a very difficult task; at the international level it is inordinately complicated. Nevertheless, the job must be done and done well, as firms and managers rise and fall on the basis of their performances, which are put under the financial magnifying glass at the MNC's headquarters.
LEARNING OBJECTIVES
After studying the material in this chapter, the student should be familiar with the following concepts:
- Financial links within an MNC
- Exposure
- Foreign exchange risk
- Macroeconomic exposure of an MNC
- Hedging as a means of protecting a company's assets
- Spot and forward rates
- Swaps
- Options
- Price transfers, fees, and royalties as means of cash transfer
- Leads and lags in invoicing, loans, and dividends as means of cash transfer
- Capital budgeting
- Funding of foreign operations
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