Finanzas Internacionales

GUIDING QUESTION

WHAT DOES MATURE SAY, J?

ALEJANDRA

YEIFREN

CRISTIAN

LIANA

When and how might your transaction exposure be affected if
decide to only invoice in dollars?

“Some international transactions involve a certain amount of goods ordered and thus involve a certain amount of foreign currency transaction.” (Madura, J. Pag, 313)

When a collection right is obtained in a currency other than the peso, for the sale of a product or service, different types of exchange risks can be evidenced, which can affect the flow of capital, the market value, competitiveness and financial information.

We can be affected at any time by any variation in the socioeconomic aspect between nations or with any other international variable such as the price of oil, the devaluation of shares, as well as their valuation. When invoicing only in dollars, we must consider that we run the risk of a fall of this currency at any time, but we can also benefit in the other scenario that this currency strengthens, and we have higher growth.

I believe that the real problem could be caused when billing is made under certain exchanges rates ant the conversion is not made on the same day and this could cause losses if the exchange rate were to decrease.

If it is only billed in dollars, losses can be seen since the dollar is a much stronger currency in the market compared to the peso, factors such as interest and exchange rates must be considered to balance the cost of changing the original currency.

What are the limitations of using currency futures and options that
might make it difficult for your company to hedge against foreign exchange risk?

“The use of a contract
forward in the manner described herein covers only for the period of the contract. It doesn't work as
continuous long-term protection against economic exposure” (Madura, J. Pag, 341)

The objective of hedges is to neutralize the risk
exchange assumed in an international operation, setting the price at a
determined rate, in this way the fluctuation of the exchange rate does not matter
nominal since the rate at which the flow received or the one due will be converted
do in another currency is already established between the importer-exporter and a
intermediary of the financial system.

In this particular case and taking into account a strong economy such as that of the United States, the risk of handling futures could be said to be low although not null, for this reason we must focus on reducing the risk, which is the most important thing when negotiating with another economy stronger than ours in order to have a certain advantage when negotiating not to obtain a greater profit but to ensure stability and reduce the risk of losses.

Our company must protect itself from buying or selling foreign currency in an erroneous way since it can clearly generate a negative cash flow and generate losses.

On the other hand, futures should also be generated with some caution because these present negative and positive effects.

The use of futures can both positively and negatively impact the company, but it is important to make use of them. When exchanging currencies, it is important to have several financial studies that allow us to assess the value of these, so with the use of futures it is expected to have a small guarantee, even though this is uncertain.

How could your company hedge against conversion exposure?

“If there is exposure to the transaction, a company faces three main risks.
You must first identify your degree of exposure to the transaction. Second, you must decide if
cover your exposure. Finally, if you decide to cover part or all your exposure, you should choose
between the different hedging techniques available” (Madura, J. Pag, 295)

Strategies can be carried out which mitigate this type of risk, which would reduce significant problems for the company, they could have forward contracts that are term and have the function of buying
 or sell a certain asset on a specific future date at a certain price. Likewise, hedging could be generated with currency accounts which are used with the types of contracts and finally, by having options on the exchange rates, what is stipulated would be maintained. agree to the contract and thus have a more established order.

It occurs to me that we could hedge the translation exposure by making a future exchange rate projection considering the capitalization of the company to make financial moves from country to country when appropriate.  

In my opinion, I would say that the company will always be exposed to these risks and it will be very difficult to protect it from these changes and movements.

Clearly, in order to mitigate these effects, fixed-term contracts can be made, either for sale or purchase, but it must be taken into account that everything has a devaluation or fluctuations in prices or costs.

Given the risks that arise in foreign exchange, several factors that may affect the flow of income must be considered. For example, carry out forward contracts, which guarantee us the exchange rate. Despite this, no measure is safe in the face of constant and unpredictable currency changes, so thorough studies must be carried out before any change.

What does corporate, international control consist of and what are its
barriers?

“Make wrong decisions that reduce its value, it is likely that another company can acquire it at a lower price
and fire mediocre managers” (Madura, J. Pag, 3)

It can be said that it is a set of processes which seeks to improve performance and increase access to external capital, which would contribute to a sustainable economy and is managed by a government structure which are the shareholders, the board of directors and the managers, where they delegate tasks within management and control rights. the barriers in the financial world are infinite since it could be said that anything can directly affect the economy, for example one of them would be the limitations of financial resources which can affect its internal functioning, on the other hand, the difficulty to Obtaining information on foreign markets affects a company when seeking information on import regulations in other
countries

This is a mechanism that seeks to make the transaction between companies more efficient, also that it is done in a better way than if it did not exist, since if it did not exist, commercial relations would not be viable or could have a balance The main barrier of this control can be taken as the supervision and implementation of the measures that are necessary to enter the corporate environment or the group. The international control can be taken as a quality measure in addition to the selection at the time of entering intentional trade, since the barriers imposed on it are determined by quality issues and according to their origin.

International corporate control is essentially a hierarchical structure which is responsible for delegating functions so that the company especially improves its economy and in such a way also imposes barriers so that the company's economy can be taken care of.

Corporate control is based on several processes that optimize the development of companies, this through tools that improve the flow of money between companies, which would increase the flow of income to the origin company. Corporate control is very important as it allows us to have more efficient business relationships, with the aim of establishing business in a better way.

What are the actions of international corporate control and how
can there be evaluated?

“They depend on reports from finance directors for information. If the managers
look out for their own interests rather than those of investors, they are likely to
overdo performance.” (Madura, J. Pag, 4)

The action of corporate control is to protect the rights of investors, promote confidence and transparency in financial markets, create a culture of corporate responsibility within organizations, these can be evaluated by reviewing current performance, compared to previous periods and competition, likewise, control of management reports for decision making and information processing, making an application of performance indicators.

These are characterized by being based on decisions taken to maintain more stable relationships, such as the management of long-term bonds to provide economic stability to its trustees, these can be evaluated according to their economic management, also in all aspects, because for this rating not only the financial management is taken into account but also the internal management as the quality of the good or service it handles in order to give it greater credibility in the international arena.

The company can count on investors, and they must have certain protection towards their rights and transparency before the financial markets and this is known as corporate control action.

One of the ways to evaluate is to identify the possible fluctuations between the different periods.

Companies can take a wide variety of actions that affect corporate control, such as maintaining or withdrawing certain business relationships, which would affect the company's performance. These actions can be evaluated by reviewing the company's income stream and verifying how each action to be taken will affect its performance in the future.

What are the common forms of Corporate Governance?

“Establish a centralized information database.
Ensure that all data is reported consistently across subsidiaries. Implement a system that automatically reviews the data to detect unusual discrepancies in relation to the norms.
Speed ​​up the process by which all departments and subsidiaries have access to the information they need.
Encourage managers to take more responsibility for financial statements by personally verifying their accuracy.” (Madura, J. Pag, 4)

There are four pillars that are managed within corporate governance, the first is known as the highest social body, which has the function of being the highest decision-making body within a company, in the second instance, there are the administrators, who are the members of the boards of directors and exercise administrative functions, on the other hand, another common form is management control, where internal evaluation is carried out
of the different bodies that make up the corporate governance system and finally, transparency, which generates market discipline that reinforces the external controls to which they are
subject to supervised entities.

There are several forms of corporate governance used by CMN.

Board member governance, in this type of governance the board of directors is responsible for appointing the company's senior management and they are responsible for overseeing the organization's decisions.

On the other hand there is governance by institutional investors, in this type of governance a significant proportion of many shares are owned by institutional investors and the ability to ensure governance may vary between types of institutional investors. And finally there is governance by militant investors.

Corporate governments in most cases are structured in a pyramidal way so that in the first instance we can find the managerial part that oversees making important decisions in the company, below this the administrative positions and finally the area in charge to carry out external controls and supervisions.

There are several common forms of corporate governance, but we mainly find the management area, followed by the administrative area. In the same way we find another variant that is the management control and the governance by investors of the institution. These forms help the company to stay out of loss situations and allow income to be generated corresponding to any activity that is carried out.

GENERAL CONCLUSION OF THE GROUP

In conclusion, it can be seen how the exposure per transaction depends on when a collection right is obtained in a currency other than the peso, for the sale of a product or service, and the flow of capital can be affected by the economic risks that arise. That they may have in each country and their value in the market, where competitiveness and financial information are part of the relevant aspects in a transaction abroad.

Hand in hand with this, we also managed to identify the correct way in which a company should structure its company and that the rights of investors be respected and take care of the economy of the company.

Analyze and understand that there are different strategies that we can implement in order to protect the company from possible fraud or economic losses such as Forward contracts and the correct way in which the company could negotiate under different currencies without obtaining cash flow. negative box