INTRODUCTION• A process of implementing and managing

financial control systems, collecting financial data, analyzing financial reports, and making sound financial decisions based on the analyses. ...

Three key elements to the process of

financial management

• Financial Planning

• Financial Control

• Financial Decision-making

INTRODUCTION

• Global cash flows

• Foreign exchange risk management

• Capital expenditure analysis

• Capital budgeting

• Objectives of international financial management

Determining Parent-Subsidiary Relationships

• Polycentric solution

• Ethnocentric solution

• Geocentric solution

Managing Global cash Flows

• Internal funds flows

• Funds positioning techniques

Common example of internal sources and flows of funds

Parent MNE

Chilean subsidiary

German subsidiary

Loan Interest payments

Loan

Interest payments

Dividends, Royalties and Fees

Equity capital investments

Multilateral Dollar Flows Between Subsidiaries

International Business Strategy in Action

• (NON-TRIAD) Tax heavens

• Fronting loans

• Multilateral netting

Foreign Exchange Risk Management

• Inflation• Addressing exchange rate fluctuations

– Translation exposure – Transaction exposure– Economic exposure

• Hedging strategies – Operating financial strategies – Forward exchange contracts – Currency options

• Developing forecasting and reporting systems

Inflation

Capital Expenditure Analysis And

Capital Budgeting

• Use of net present value

• Institutional features– Government subsidies and controls

– Political risk insurance

Capital Budgeting: Eight Steps

Strategic International Finance

• Establishing overseas operations

• Reducing financial risk– Alliances

– Cost-cutting

Conclusion• International finance has an additional layer of

complication that involves currency risk and conversion, different laws, regulations, languages, and business practices

• Today, however, world production and trade are global in nature

• Therefore, financing is also global

• This leads to less market segmentation, more liquidity, and greater efficiency in world capital markets