Gyan ganga

Institute of technology &sciences

Assignment on
International financial management

Submitted to submitted by
Mr.Vinamra nayak Nishant tharwani
En.no.:-122
Date of submission date of assignment
10-01-2011 30-12-2010
TOPIC- Define international financing. highlight the various
international financial environment which affect project
development & its structure & also identify the different
project risks involved in the initial operational stage of any
project.

International finance
There is no dought that in many ways the world economy is
becoming a single huge & complex organism no nation today
can efford to think it self as an economic entity into it self.
international finance is very important to all the developing
contries because it support to private sector in developing
countries.
The main function function of international financial
management is-
(1) Acquisition of funds.
(2) Investment of funds.
 (1) Acquisition of funds- in the international finance
acquisition of fund means collect the funds where the
interest rate is low.

(2)Investment of funds-after the acquisition of funds invest the

funds where the interest rate is very high .

International finance is the branch of

economics that studies the dynamics of exchange rates, foreign
investment, and how these affect international trade. It also
studies international projects, international investments and
capital flows, and trade deficits. It includes the study of futures,
options and currency swaps. International finance is a branch of
international economics.
The international financial environment is made of domestic
capital market, host country capital market & international
capital market. Internal corporate funds flows in the form of
loan payments & dividend payments. Loan payments are often
undertaken to access fund & dividend payment are taken to
reduce taxes or currency risk.

International financial environment which affect

the project development
 Political:-political environment plays an important role in
international finance it consist environmental regulations
& protections tax policies, international trade regulation
 & restriction contract enforcement low consumer
protection employment lows government orgnisation.

 Economic:- economic environment which affect the

international project development are economic growth
interest rates & monetary policies government spending
unemployment policy taxation exchange rates inflation
rate stage of the business cycle consumer confidence.

 Social:- social environment which affect the international

project development are income distribution
demographics population growth rates, age, distribution
social mobility, life style changes, feeling on safety living
condition.

 Technological:- technological environment which affect

the international project development are government
research spending industry focus can technological effort
new inventions and development rate of technology.

Some other factors are:-

 The end of the cold war.
 Industrialization & growth of the development world.
  Increased globalization.

Different project risks involved in the initial

operational stage of any project

In enterprise risk management, a risk is defined as a possible

event or circumstance that can have negative influences on the
enterprise in question. Its impact can be on the very existence,
the resources (human and capital), the products and services, or
the customers of the enterprise, as well as external impacts on
society, markets, or the environment. In a financial institution,
enterprise risk management is normally thought of as the
combination of credit risk, interest rate risk or asset liability
management, market risk, and operational risk.
Risk in a project or process can be due either to Special Cause
Variation or Common Cause Variation and requires
appropriate treatment. That is to re-iterate the concern
about extremal cases not being equivalent in the list
immediately above.

 Exchange risk & capital market risk:- cash flow from the
foreign project are in a foreign currency and therefore
subject to exchange risk from the parents point of view.

 Political risk:- assets located abroad are subject to risk of

appropriation or nationalization by the host country
 government. Also there may be changes in applicable
withholding taxes restrictions on remittances by the
subsidiary to the parent etc.

 International taxation:- in addition to the taxes the

subsidiary pays to the host government there will be
generally be withholding taxes on dividends and other
income remitted to the parent.

 Blocked funds:- sometimes a foreign project can become

an attractive propel because the parent has some funds
accumulated in a foreign country which can not be taken
out (or can be taken out only with heavy penalties in the
form of taxes).