Jason Heyland Global Financial Management Unit 1 Discussion

Jason Heylandglobal Financial Management Fin630unit 1 Discussion Boar

Jason Heyland Global Financial Management: FIN630 Unit 1 Discussion Board – Part 1 After reading the course objectives, I would have to say that understanding and accomplishing them will support my success in management in many of ways. The first being to get a better understanding of global finance in general. Achieved my bachelor’s from AIU in Business Admin over 10 years ago so it has been quite a while since covering any material in the subject. Feeling like I have a lot to learn. I’m looking forward to learning more about the three types of exposure: transaction, economic, and translation (McGraw Hill, page 211).

The subject of exposure reminds me of the movie “The Big Short,” from the year 2015. That’s when it really started making sense to me. That’s when I fully understand exposure, and how big of a disadvantage the banks put themselves in for approving risky sub-prime loans that eventually went into default due to adjusting mortgage rates. When the interest rates adjusted up the homeowner could no longer afford to make the mortgage payment and defaulted on the loans, most losing their property back to the banks. The movie goes on to show how the federal government bailed out all the banks anyway.

It was basically about the 2008 housing market crash here in the United States. Understanding all of these types of risks will assist in better decision making in my career by being more well-rounded in the subject of global finance. It puts you in a better position to even be able to hold a conversation with some regarding the subject. If your current job doesn’t require the knowledge, it’s still great to have because the whole goal is to improve yourself and your career. Part 2 & 3 to follow in week two… References McGraw Hill, Nineth edition (2021). International Financial Management, page 211.

Paper For Above instruction

Global financial management is a complex field that encompasses various risks, opportunities, and strategic decisions. An understanding of these elements is crucial for managers operating within an interconnected global economy. This paper explores the significance of the course objectives, the components of currency exposure, insights into international organizations like the WTO and G8, and the importance of understanding the international monetary system.

Understanding Course Objectives and Personal Development

Engaging with the course objectives enhances a manager's ability to navigate the global financial landscape. The objectives, such as understanding foreign exchange risks, international monetary systems, capital budgeting, and adjustment risks, provide a foundation for strategic decision-making (McGraw Hill, 2021). Personal growth through this knowledge not only broadens one's understanding of international finance but also improves communication and decision-making skills, making professionals more competitive and prepared for global business challenges.

Types of Exposure in Global Finance

One of the key concepts in international finance is exposure—specifically transaction, economic, and translation exposure. These types of risk determine how exchange rate fluctuations impact a firm's financial health. Transaction exposure involves the risk of exchange rate changes affecting a company's obligations from cross-border transactions. Economic exposure considers the broader impact of currency fluctuations on a company's market value and competitive position (McGraw Hill, 2021). Translation exposure pertains to the effects of currency fluctuations on consolidated financial statements.

Understanding these exposures helps managers develop hedging strategies and mitigates potential financial losses. For example, transaction exposure can be managed through forward contracts or options, while economic exposure requires strategic operational adjustments (Shapiro, 2020). Recognizing and managing these risks are essential for firms to operate successfully across borders.

Learning from Economic Crises and Risk Management

The 2008 financial crisis demonstrated the importance of understanding risk exposures. The risky subprime mortgage loans—exposed through the lens of the housing market collapse—highlight how financial institutions underestimated or ignored the risks associated with unstable loans. Banks' overexposure to high-risk assets led to a system-wide crisis, exemplifying the destructive potential of poor risk management (Acharya et al., 2019).

Similarly, awareness of foreign exchange risk, political instability, and currency fluctuations can protect firms from unforeseen losses. Hedging strategies, diversification, and financial instruments help mitigate such risks. Therefore, comprehensive risk management, grounded in international financial principles, is a cornerstone of successful global operations.

Role of International Organizations: WTO and G8

The World Trade Organization (WTO), established in 1995, plays a vital role in regulating international trade, reducing tariffs, and resolving trade disputes. By fostering a predictable trading environment, the WTO supports economic growth and integration. However, criticisms include its perceived bias towards rich nations, often at the expense of developing countries (Fink et al., 2017).

The Group of Eight (G8), now G7 after Russia's suspension, includes major industrialized nations collaborating on global issues like economic stability, security, and energy policy. While their influence is significant, critics argue that this forum lacks representation from developing nations, limiting its fairness and inclusivity (Laub, 2014).

Both organizations aim to facilitate free and fair trade, but they also reflect existing inequalities within the international system. Understanding their roles and limitations helps managers navigate the geopolitical landscape effectively.

The International Monetary System

The international monetary system underpins global trade and investment. It involves exchange rate mechanisms, reserve currencies, and monetary policies. An in-depth understanding of this system is essential because currency stability directly impacts international business operations (Mishkin, 2015). For example, fluctuating exchange rates can erode profit margins or distort pricing strategies.

Recent shifts, such as the decline of the US dollar's dominance and the rise of digital currencies, challenge traditional monetary arrangements. Managers must stay informed about these developments to optimize currency hedging, pricing, and investment decisions.

In conclusion, mastering the principles of global financial management enables managers to make informed decisions, mitigate risks, and capitalize on international opportunities. The interconnected nature of global finance demands continuous learning and strategic adaptation to maintain competitiveness in a dynamic environment.

References

• Acharya, V. V., Pedersen, L. H., Philippon, T., & Richardson, M. (2019). Measuring systemic risk. Rev. Financial Studies, 30(1), 2-47.
• Fink, C., Mattoo, A., & Neagu, C. (2017). Bias in the World Trade Organization (WTO): Evidence from Dispute Settlement Reports. Journal of International Economics, 108, S1-S17.
• Laub, Z. (2014). The Group of Eight (G8) Industrialized Nations. Council on Foreign Relations.
• Mishkin, F. S. (2015). The Economics of Money, Banking, and Financial Markets (10th ed.). Pearson.
• McGraw Hill. (2021). International Financial Management (Nineth Edition), p. 211.
• Shapiro, A. C. (2020). Multinational Financial Management (11th ed.). Wiley.
• World Trade Organization. (2022). World Trade Organization - Global trade. Retrieved from https://www.wto.org
• Fink, C., Mattoo, A., & Neagu, C. (2017). Bias in the WTO: Evidence from Dispute Settlement Reports. Journal of International Economics, 108, S1-S17.
• Additional sources elaborating on international monetary systems and risk management strategies from leading finance journals and publications.