Free Essay

International Finance(Case Study on Ruritanian Project)

In: Business and Management

Submitted By Jennifer0026
Words 4204
Pages 17
This report will present a discussion on the financial challenges and issues based on the Ruritanian Project case study. The report is concerned with analyzing the investment environment of the host nation, maximizing the investment return and minimizing the risks which could have a negative impact on the financial performance of the Ruritanian project. Firstly, the national economy environment will be discussed based on the national GDP growth and inflation rate; secondly, there is a discussion on the foreign exchange risks of Rutitania Crown against international currency; third, the issue of joining the Euro zone will be analyzed in terms of benefits and drawbacks; next, the taxation effect in the investment decision making will be accessed and finally there will be a discussion on the political environment.

THE NATIONAL ECONOMY AND THE IMPLICATIONS FOR THE PROJECT
2.1 The Relationship between National Economy and the Foreign Direct Investment (FDI)
The economic growth of the host nation has always had a positive relationship with the foreign direct investment decision making. The positive effect of host country economic growth on investment decision making has been supported by various studies (Ericsson and Irandoust, 2000; Dhakal, Kamal and Upadhyaya, 2007; Barrell and Pain, 1996; Grosse and Trevino, 1996; Taylor and Sarno, 1999; Trevino et al., 2002). Traditionally the economic growth of the host nation induces FDI inflow when FDI is seeking consumer markets, or when the economic growth leads to greater economies of scale and, increased cost efficiency of the project. The FDI is more likely to exist in healthy and open economies with steady growth. In addition, an earlier study by McGowan and Moeller (2011) has also argued that the causal relationship between FDI and economic growth of the nation in the long run.
2.2 The Implications for Ruritiania Project
As it can be seen from the case, the Ruritiania has enjoyed a relatively steady economic growth during the past years. This had contributed to create a positive investment environment to the company. The Gross Domestic Product (GDP) indicates the market value in the country, coming from the consumer, investment and government spending (Haidar, 2007; Graham, 2001; Steil, 1993); the GDP growth rate could be one of the most important indicators to gauge the health of a country's economy. As the case shows that the Ruritania has enjoyed a stable growth, with annual growth rate averaged around 6% per annum over the last five years. This creates a stable invest environment for the new manufacturing facility project. Meanwhile, the price inflation rate is important factor as it represents the rate at which the real value of an investment is eroded and the loss in spending power over time (Rugman, 1980; Boensztein, 1997). In the case of Ruritanian project, the price of inflation rate has been stable, with an average rate of 5.2% over the past five years. This allows a stable return rate of the investment project under the steady inflation rate. And with stable inflation rate in the future, it is expected to enjoy stable return in the following years.
However, there is a risk exits due to the low annual growth rate of 0.7% as the case shows. Comparing with the average 6% per annual growth over the past five years, the dramatic fall could be a risk indicator for the investment. According to Srinivasula (1983), economic risk is the risk that an endeavor will be economically unsustainable, for a variety of reasons ranging from a change in economic trends to fraudulent activities which ruin the outcome of the project. Hence the low growth has to be considered to determine whether or not the potential risks are outweighed by the benefits.
THE ISSUE OF FOREIGN EXCHANGE RATE
3.1 The Foreign Exchange Exposure
Among the financial risks inherent in international business operation, the foreign exchange exposure represents one of the most important considerations for the multinational corporation managers. Foreign exchange exposure is referred as the variability of a firm’s value due to uncertain changes in the rate of exchange (Dooley and Isard, 1980; Haglin, 2003, Harris&Malindretos&Bobb, 2011); and it is also defined by Dr. Hekman (1985) as the degree to which corporations’ earnings, cash flow or market value can be affected by exchange rate changes. Traditionally, there are three main types of foreign exchange exposure: translation, transaction, and economic exposure (Buckley, 2004; Hagelin, 2004; Harris, Malindretos and Bobb, 2011). The translation exposure measures the change in the value of the firm’s obligations which are incurred prior to the change in foreign exchange rates but not expected to be settled until after the exchange rates change (Bodnar, 2000; Dumas and Solnik, 1995; Harris, Malindretos and Bobb, 2011). Transaction exposure refers to gains or losses that can arise from settlement of transactions whose terns are stated in foreign currencies (Shubita et al., 2004). And economics exposure is defined as the possibility that the net present value of a company’s expected cash flow will change due to an unexpected change in foreign exchange rates. There can be an upward or downward change in value. This depends on the effect of the exchange rate change on sale, volume, prices, and costs.
3.2 The implications of Foreign Exchange Exposure
One of important obligations of the financial manager is to measure the effect of foreign exchange exposure and manage it as to maximize the investment return, net cash flow and market value of the firm (Mendizabal, 1998; Baker and Beardsley, 1993). As it can be seen from the Ruritanian Project, the Crown traditionally had enjoyed a free float exchange rate during past decades; and the government also plans to make effect to peg the currency against the major international currencies in the next few months. The company could be benefit from this in the investment project, since the stability of the value of currency always represents low uncertainty and low transaction risks of the business. Transaction risks has always create difficulties for multinational firms dealing business in different currencies, as exchange rates can fluctuate significantly over a short period of time. With the stable value of Ruritania Crown, the risk could be able to reduce. Moreover, pegging the Crown against a major international currency as the government announced also contributes to a stable exchange rate and in turn creates favorable investment environment for multinational corporations.
The Issue of Joining Euro Zone
4.1 The European Monetary System and the Euro Zone Single Currency
European Monetary System (EMS) was derived from the arrangement established in 1979 among the European Union countries; the then agreement was with two objectives: establishing a common area of exchange rate stability to encourage trade and growth of accelerating the convergence and integration of economic policies within the EU countries (Buckley, 2004). The EMS has successfully contributed to the European single currency – the Euro. According to Dabrowski and Rostowski (2003), the enlargement of the euro zone is an ongoing process within the European Union (EU). Greece joined in 2001, Slovenia joined in 2007, Cyprus and Malta in 2008, Slovakia in 2009, and Estonia joined on 1 January 2011 (Dyson, 2000; Dabrowski and Rostowski, 2003; EU NEWS 2009; BBC NEWS 2011).
4.2 The Implications for THE Project if Ruritania Join the Euro Zone
In the case study of Ruritania Project, the Ruritania has been prepared for times joining the euro zone. This could have a rage of implications of the overall project. For the bright side, the European single currency has brought great opportunities for the project and headquarters in the UK if the country successfully joins the euro zone area. As Mendizabal (1998) argued that the European Exchange Rate Mechanism ERM was a semi fixed exchange rate system. Firstly, joining the Euro Zone contributes to eliminating exchange rate uncertainty; and allows the manufacture avoid the fluctuations of the value of the Crown (Buckley, 2004; Mendizabal, 1998; Haidar, 2007; Tufano, 1996). Although the Crown seems to keep stable during several years, there are risks the Crown fluctuating up and down due to a series of reasons. If the value of crown in Ruritania fluctuates significantly, this could cause serious problems for the project engaged in trade. For example if the manufactory is exporting to the UK, a rapid appreciation in sterling would make the exports from Ruritania uncompetitive and therefore reduce profitability or even go out of business. Secondly joining the euro zone encourages further investment in Ruritania. The uncertainty of exchange rate fluctuations of Crown might reduce the incentive for the project to invest in export capacity. If joining the euro zone, long-term investment is encouraged by the sound and prudent management of Economic and Monetary Union; this helps build trust in the economy of the euro area and reduces uncertainty about the future (EU Business, 2009; Graham, 2001; Graham, 2003). Hence, the company is able to invest more in growth and new technologies in the Ruritania project rather than saving money in reserve in case of an economic downturn of Ruritania.
However, joining the euro zone might cause a range of problems. Firstly, if Ruritiania join the area, there might be no scope for devaluation of the currency. Since the start of the Euro, several countries have experienced the rising labor costs. This has made exports of euro countries uncompetitive (Mendiabal, 1998; Hagelin, 2004; Palmer, 1998). Traditionally the countries made their currency devalue to restore competitiveness in the international market; however in the Euro zone, the country would lost the opportunity to devalue the currency and might stuck with uncompetitive exports if Ruritania. This has led to record current account deficits, a fall in exports and low growth. This has particularly been a problem for countries like Portugal, Italy and Greece.
THE TAXATION EFFECTS AND IMPLICATIONS FOR THE PROJEC
5.1 The Taxation and Investment Decision Making
Minimizing the cost is one of the major objectives for the multinational corporations. The foreign tax credits could be a crucial factor affecting the financing choices of multinational organizations (Graham 2001; Talpos and Vancu, 2009). Although the relative literature about the effectiveness of taxes on cost saving on investment fairly inconclusive. There are opportunities for multinational firms to take advantage of changes of tax-avoidance and tax-evasion (Graham and Smith, 1999). Different kind of tax has different impact on the investment decision making. In this way, the kind of tax - incentives, may be classified as: value-added tax, corporate income tax, property–tax, royalty payments, import-tariffs, sales-taxes, tax-holidays, grants, depreciation allowances, enhanced deduction, tax-holiday, special investment allowance (Khoury and Chan, 1998; Lewent and Kearney, 1990). During the period of 1990s, a majority of countries reduce the corporate income tax-rate to encourage investment. Nowadays, countries are led to a downwards pressure of tax-rates and for this reason tax-rate is very significant for the allocation of investment among countries (Modigliani and Miller, 2003). For this reason, most of multinational organizations are tend to emphasize on the host-country corporate tax rates.
5.2 The Implications on Ruritania Project
As the case shows, that if the other major party elected, there is a high possibility that they would increase both corporate and personal taxation to provide additional funding for their social expenditure. This would become a disadvantage for the investment project. The increase of corporate income tax rate will be a great challenge for the company. Firstly the tax raise will directly led to a decrease of the net profit of the project in the balance sheet in Ruritania, and finally affects the dividends of shareholders overall. Meanwhile, the raise of taxation will in turn result in a loss of competitive advantages in the international market in product price.
THE POLITICAL RISKS AND IMPLICATIONS ON THE PROJECT
4.1 The Political Risks
The investment in a foreign country is subject to a number of risks; this might include expropriation and nationalization risks. The political risk is defined by Buckley (2004) as the exposure to a change in value of an investment or cash position resultant upon government actions. In most countries, governments intervene in their national economies. This has resulted in multinational organizations face increasing political risks. The political risks take various forms, like changes in taxation regulations, changes in exchange rate controls, the stipulations about local production, the commercial discrimination against foreign-controlled business to restrictions on access to local borrowings. In addition, the war and civil disturbance might cause great loss due to the destruction, disappearance, or physical damage to assets caused by politically; moreover, the motivated acts of war or civil disturbance, revolution, insurrection, and coup d'etat would also cause problems (Nagy, 1984; Buckley, 2004). Inability to convert local currency into foreign exchange as well as delays in acquiring foreign exchange caused by the host government's actions or failure to act.
4.2 The political implications on the Ruritania Project
In the case of Ruritania Project, first of all, there is the risk that a government might be able to avoid its contractual obligations through sovereign immunity doctrines due to the change of political parties in the national government; and, the project in Ruritania might have political barriers due to commercial discrimination against foreign controlled business on access to local markets and financial borrowings (Nagy, 1984; Thygesen, 1997; Buckley, 2004).
To Minimizing the political risks in Ruritania, there are a range of mechanisms for minimizing political risk. Firstly, it is essential between host nation in Ruritania and headquarter in the UK to obligate the contract; the agreements of the contract would contributes to assurance that project will not be interfered with any other political factors. For instance, to make sure the project would not affected by the election in Ruritania. Secondly, it is required to get political risk insurance from bodies which provide such insurance. By doing so the company is able minimize the political risk outside the UK and guarantee the success of the business in host nation.
CONCLUSIONS
This report has attempted to access a range of financial significant issues affecting the investment project based on the Ruritanian Project. First, the economic growth of a nation has generally pointed to a positive relationship with the foreign direct investment decision making. The relatively steady economic growth during the past years has contributed to creating a positive investment environment to the company. Second, the foreign exchange exposure represents one of the most important considerations for the multinational corporation managers. The Ruritania Crown had enjoyed a stable value against major international currencies, this represents low uncertainty and low transaction risks of the project. The aim of European Monetary System is establishing a common area of exchange rate stability to encourage trade and growth of accelerating the convergence and integration of economic policies within the EU countries, and Ruritania joining the Euro zone indicates a stable exchange rate and less transaction cost. Political environment is another consideration, it is necessary to obligate the contract between the host nation in Ruritania and headquarter in the UK to assure that project will not be interfered with any other political factors. And, get risk insurance from bodies which provide such insurance.

REFERENCES
Alfaro, L. (2003) Foreign Direct Investment and Growth: Does the Sector Matter?. [Online] Available at: http://gwww.grips.ac.jp/teacher/oono/hp/docu01/paper14.pdf [Accessed: 10th May, 2012].
Baker, J. C. & Beardsley, L. J. (1973) Multinational companies: use of risk evaluation and profit measurement for capital budgeting decisions. Journal of Business Finance. Vol. 5, Issue: 1, pp. 38-43.
Buckley, A. (2004) Multinational Finance Fifth Ed. Prentice Hall, Financial Times.
Dabrowski, M. & Rostowski, J. (2006) The Eastern Enlargement of the Eurozone. Netherlands: Springer.
Dhakal, D., Rahman, S. & Upadhyaya, K. P. (2007) Foreign direct investment and economic growth in Asia. Indian Journal of Economic and Business. pp. 1-22. [Online] Available at: http://findarticles.com/p/articles/mi_m1TSD/is_1_6/ai_n25012614/pg_2/?tag=content;col1 [Accessed: 10th May, 2012].
Demirguc-Kunt, A., and V. Maksimovic. 1998. Law, finance, and firm growth. Journal of Finance 53 (6): 2107–37.
Doukas, P. (1983) The Exposure of US Multinational Corporations to Foreign Exchange Fluctuations Arising from the Translation of Financial Statements of their Foreign Subsidiaries, PhD dissertation, Dept of Economics, New York University.
Dufey, G. & Srinivasulu, S. L. (1983) The case for corporate management of foreign exchange risk. Journal of Financial Management. Winter, pp. 54-62.
Dumas, B. & Solnik, B. (1995) The world price of foreign exchange risk. Journal of Finance. Vol. 50, Issue: 2, pp. 445-479.
Graham, J. R. & Smith, C. W. Jr. (1999) Tax incentives to hedge. Journal of Finance. Vol. 54, pp. 2241-2262.
Graham J.R. and D.A. Rogers, (2002), Do firms hedge in response to tax incentives? Journal of Finance 57, 815–839.
Graham J., 2003, Taxes and Corporate Finance: A Review, Review of Financial Studies, 16, 4, 1075-1129
Haidar, J.I. (2012) Sovereign credit risk in the Eurozone. Journal of World Economics. Vol. 13, No. 1, pp. 123-136.
Hagelin, N. & Pramborg, B. (2004) Empirical evidence on the incentives to hedge transaction and translation exposure. Journal of Finance. pp. 1-27.
Hagelin N. and Pramborg B., 2004, Hedging foreign exchange exposure: Risk reduction from transaction and translation hedging, Journal of International Financial Management and Accounting 15, 1–20.
EU business (2009) The Euro – Business Benefits. [Online] Available at: http://www.eubusiness.com/topics/euro/business [Accessed: 9th May, 2012].
Hagelin, N. (2003) Why firms hedge with currency derivatives: an examination of transaction and translation exposure. Journal of Applied Financial Economics. Vol. 13, pp. 55-69.
Mendizabal, H. R. (1998) Monetary Unions and the Transaction Cost Savings of a Single Currency. [Online] Available at: http://www.econ.upf.edu/docs/papers/downloads/291.pdf [Accessed: 9th May, 2012].
Palmer, J. (1998) The European Single Currency: Has The Left It Wrong. Journal of New Interventions. Vol. 8, No. 4. [Online] Available at: http://www.whatnextjournal.co.uk/Pages/Newint/Euro.html [Accessed: 10th May, 2012].
McGowan, C. B. & Moeller, S. E. (2011) A Model for Making Foreign Direct Investment Decisions Using Real Variables for Political and Economic Risk Analysis. Journal of Managing Global Transitions. Vol. 7, Issue: 1, pp. 27-44.
Kidwell, D. S., Marr, M. W. & Thompson, G. R. (1985) Eurodollar bonds: alternative financing for US companies. Financial Management. Winter, pp. 18-27.
Nagy, P. (1984) Country Risk. London: Euromoney Publications.
Rugman, A.M. (1980) Internationalization as a general theory of foreign direct investment. Journal of Weltwirtschaftliches Archiv. Vol. 116, pp. 365-379.
Srinivasula, S.L. (1983) Classifying foreign exchange exposure. Journal of Financial Executive. February, pp. 36-44.
Steil, B. (1993) Corporate foreign exchange risk management: a study in decision making under uncertainty. Journal of Behavioural Decision Making. Vol. 6, pp. 1-31.
Thygesen, N. (1997) Inflation and exchange rates. Journal of International Economics. Vol. 8, pp. 301-317.
Tufano, P. (1996) Who manages risk? An empirical examination of risk management practices in the gold mining industry. Journal of Finance. Vol. 1, No. 4, pp. 1097-1137.

BIBLIOGRAPHY
Aggarwal R., 1991, Management of accounting exposure to currency changes: Role and evidence of agency costs, Journal of Managerial finance 17, 10–22.
Alfaro, L. (2003) Foreign Direct Investment and Growth: Does the Sector Matter?. [Online] Available at: http://gwww.grips.ac.jp/teacher/oono/hp/docu01/paper14.pdf [Accessed: 10th May, 2012].
Dabrowski, M. & Rostowski, J. (2006) The Eastern Enlargement of the Eurozone. Netherlands: Springer.
Mendizabal, H. R. (1998) Monetary Unions and the Transaction Cost Savings of a Single Currency. [Online] Available at: http://www.econ.upf.edu/docs/papers/downloads/291.pdf [Accessed: 9th May, 2012].
EU business (2009) The Euro – Business Benefits. [Online] Available at: http://www.eubusiness.com/topics/euro/business [Accessed: 9th May, 2012].
Hishow, O. (2007) The Effects of the Common Currency on Europe’s Economic Integration. Berlin: SWP.
Palmer, J. (1998) The European Single Currency: Has The Left It Wrong. Journal of New Interventions. Vol. 8, No. 4. [Online] Available at: http://www.whatnextjournal.co.uk/Pages/Newint/Euro.html [Accessed: 10th May, 2012].
Sawyer, M. (1999) Minsky’s Analysis, the European Single Currency, and the Global Financial System. [Online] Available at: http://www.levyinstitute.org/pubs/wp/266.pdf [Accessed: 10th May, 2012].
McGowan, C. B. & Moeller, S. E. (2011) A Model for Making Foreign Direct Investment Decisions Using Real Variables for Political and Economic Risk Analysis. Journal of Managing Global Transitions. Vol. 7, Issue: 1, pp. 27-44.
Dhakal, D., Rahman, S. & Upadhyaya, K. P. (2007) Foreign direct investment and economic growth in Asia. Indian Journal of Economic and Business. pp. 1-22. [Online] Available at: http://findarticles.com/p/articles/mi_m1TSD/is_1_6/ai_n25012614/pg_2/?tag=content;col1 [Accessed: 10th May, 2012].
Baker, J. C. & Beardsley, L. J. (1973) Multinational companies: use of risk evaluation and profit measurement for capital budgeting decisions. Journal of Business Finance. Vol. 5, Issue: 1, pp. 38-43.
Belk, P. A. & Glaum, M. (1990) The management of foreign exchange risk in the UK multinationals: an empirical investigation. Journal of Accounting and Business Research. Vol. 21, Issue: 8, pp.3-11.
Bekaert, G., Harvey, C.R. & Lundblad, C. (2001) Emerging Equity Markets and Economic Development. [Online] Available at: http://faculty.fuqua.duke.edu/~charvey/Research/Working_Papers/W49_Emerging_equity_markets.pdf [Accessed: 10th May, 2012].
Boensztein, E., Gregorio, J.D. & Lee, J. (1997) How does foreign direct investment affect economic growth. Journal of International Economic. Vol. 45, Issue: 1998, pp. 115-135.
Dichtl, L. E. M., Liebold, M., Koglmayr, H. G. & Muller, S. (1983) The foreign orientation of management as a central construct in export centred decision making processes. Journal of Research for Marketing. Vol. 10, pp. 7-14.
Doukas, P. (1983) The Exposure of US Multinational Corporations to Foreign Exchange Fluctuations Arising from the Translation of Financial Statements of their Foreign Subsidiaries, PhD dissertation, Dept of Economics, New York University.
Dufey, G. & Srinivasulu, S. L. (1983) The case for corporate management of foreign exchange risk. Journal of Financial Management. Winter, pp. 54-62.
Demirguc-Kunt, A., and V. Maksimovic. 1998. Law, finance, and firm growth. Journal of Finance 53 (6): 2107–37.
Hagelin N. and B. Pramborg, 2004, Hedging foreign exchange exposure: Risk reduction from transaction and translation hedging, Journal of International Financial Management and Accounting 15, 1–20.
Hakkarainen A., Joseph N., Kasanen E., and V. Puttonen, 1998, The foreign exchange exposure management practices of Finnish industrial firms, Journal of International Financial Management and Accounting 9, 34–57.
Haushalter G.D., 2000, Financing policy, basis risk, and corporate hedging: Evidence from oil and gas producers, Journal of Finance 55, 107–152.
Geczy, C., Minton, B. A. & Schrand, C. (1997) Why firms use currency derivatives. Journal of Finance. Vol. 52, pp. 1323-1354.
Graham J.R. and D.A. Rogers, (2002), Do firms hedge in response to tax incentives? Journal of Finance 57, 815–839.
Graham, J. R. & Smith, C. W. Jr. (1999) Tax incentives to hedge. Journal of Finance. Vol. 54, pp. 2241-2262.
Khoury, S. J. & Chan, K.H. (1988) Hedging foreign exchange risk: selecting the optimal tool. Midland Corporate Finance Journal. Vol. 5, Issue: 4, pp. 40-52.
Kidwell, D. S., Marr, M. W. & Thompson, G. R. (1985) Eurodollar bonds: alternative financing for US companies. Financial Management. Winter, pp. 18-27.
Lewent, J.C. & Kearney, A.J. (1990) Identifying, measuring and hedging currency risk at Merck. Journal of Applied Corporate Finance. Vol. 2, Issue: 4, pp.19-28.
Nagy, P. (1984) Country Risk. London: Euromoney Publications.
Marston, R.C., 2001, The effects of industry structure on the economic exposure, Journal of International Money and Finance 20, 149-164.
Nance D.R., Smith C.W., and C.W. Smithson, 1993, On the determinants of corporate hedging, Journal of Finance, 48, 267–284.
Oxelheim L. and C. Wihlborg, 1997, Managing in the Turbulent World Economy: Corporate Performance and Risk Exposure, John Wiley.
Rugman, A.M. (1980) Internationalization as a general theory of foreign direct investment. Journal of Weltwirtschaftliches Archiv. Vol. 116, pp. 365-379.
Srinivasula, S.L. (1983) Classifying foreign exchange exposure. Journal of Financial Executive. February, pp. 36-44.
Steil, B. (1993) Corporate foreign exchange risk management: a study in decision making under uncertainty. Journal of Behavioural Decision Making. Vol. 6, pp. 1-31.
Smith C.W. and J. Warner (1979). On financial contracting: An analysis of bond covenants, Journal of Financial Economics, 7, 117–161.
Solnik, Bruno, 1983, International arbitrage pricing theory, Journal of Finance 38, 449--457.
Stambaugh, Robert F., 1982, On the exclusion of assets from tests of the two parameter model: A sensitivity analysis, Journal of Financial Economics 10, 237-268.
Stulz, Rene, 1981a, On the effects of barriers to international investment, Journal of Finance 36, 923-934.
Stulz, Rene, 1981b, A model of international asset pricing, Journal of Financial Economics 9, 383-406.
Thygesen, N. (1997) Inflation and exchange rates. Journal of International Economics. Vol. 8, pp. 301-317.
Tufano, P. (1996) Who manages risk? An empirical examination of risk management practices in the gold mining industry. Journal of Finance. Vol. 51, pp. 1097-1137.
Vernon, R. (1966) International investment and international trade in the product cycle. Quarterly Journal of Economics. Vol. 80, pp.190-207.

Similar Documents

Premium Essay

Case Study of Islamic Finance

...GCC P. 28 GIF Magazine Special Report: Takaful in 2010 and Beyond P. 23 gif Interview Interview with Dr. Alberto Brugnoni: “Islamic Finance is not the exception, but the rule of normal financial behaviour” . Dr. Alberto Brugnoni is an international consultant in Islamic finance and ethics and is Founder and Director General of AASAIF, an organisation that participates in some of the most important international initiatives in Islamic finance. Dr. Brugnoni acted as Chair for the recent International Takaful Summit 2010 in London and moderated the session entitled “Enabling and Expanding the Scope of Takaful”. Here, Dr. Brugnoni speaks with Global Islamic Finance Magazine about why the Summit was such a big success, his work with Islamic microfinance, and the state of the Islamic finance industry in Europe. How did you find the International Takaful Summit? It was a great success for two reasons. 1) It was very well attended, with more than 450 delegates signing in. 2) We had institutional support. Nick Anstee, the Lord Mayor of London attended the opening session and spoke, as well as sitting in on several sessions. We also had dinner in the House of Lords at the invitation of Lord Mohamed Sheikh, which added credibility to the event. It was nice weather, nice atmosphere: It was 38 Global Islamic Finance September 2010 not just a formal event but also provided the opportunity for networking. To be honest with you, sometimes conferences can be hot......

Words: 1698 - Pages: 7

Premium Essay

Ruritanian Project

...recent opinion polls suggest that the present Government currently enjoys a 7% lead over the other major party. This opinion poll lead has remained reasonably stable for the last eight months. The other major party is also committed to democratic principles and a market based economy although, if elected, it is likely that they would increase both corporate and personal taxation to provide additional funding for their proposed social expenditure. The Crown (the currency of Ruritania) traditionally had a centrally managed exchange rate, but the Ruritanian Government allowed the Crown to float freely about twelve years ago. This, initially, resulted in a fairly large drop in the value of the Crown, but the Crown has enjoyed reasonable stability against major international currencies during the past three or four years. There has been persistent press speculation that the present Government will peg the Crown against a major international currency within the next few months. This would be a preparatory step prior to applying for inclusion in ERM 2 and, eventually, adopting the Euro as a full member of the Eurozone. Ruritania is currently negotiating for membership of the European Union and hopes to join in about 2014. The total investment is expected to be, approximately, GBP 55 million. The total Market Capitalisation of your Company is around GBP 600 million. The reasons for this proposal are to benefit from the low labour cost currently experienced in Ruritania......

Words: 472 - Pages: 2

Premium Essay

A Practical Case Study in International Project Management

...International Project Management - a practical case study by Lukas Hufnagel I.Table of Content 1. Introduction 3 2. Project framework 3 3. Project Timeline & Phases of the project 5 3.1 Introduction Phase 5 3.1.1 Stakeholder analysis 7 3.1.2 Action plan 10 3.2 Research & Preparation Phase 11 3.3 Action & Evaluation Phase 13 3.4 Review Phase 14 4. Project manager skills 15 5. Lessons learned 17 II. Reference List 19 III. Appendix 19 Exhibit 1: ‘Campus Live – Infoveranstaltung für Unternehmen’ 19 Exhibit 2: Draft questionnaire ‘Bewerbungsvorlieben’ 20 Exhibit 3: Info letter for student assistants 21 Exhibit 4: Questionnaire ‘Fragebogen Jobbörse 2013’ 22 Exhibit 5: Presentation ‘PPT Jobbörse’ 24 Exhibit 6: Poster ‘T-shirt raffle’ 25 2 1. Introduction On April 23rd of this year the annual job fair ‘firstcontact’ was held at the Stadthalle Deggendorf. Over 150 firms used this opportunity to present themselves to the students of Deggendorf University of Applied Sciences(First Contact e.V., 2013). This job fair is the chance for the students to get in contact with company representatives and inform themselves about job opportunities, trainee programs and much more for the life after their graduation. The fair is organised by the student’s club First Contact e.V. of Deggendorf University of Applied Sciences. Back in March of this year, at the beginning of the summer term, I applied for a job as a student assistant for the career service at HDU Deggendorf. I was hired......

Words: 6152 - Pages: 25

Premium Essay

Case Study on the Mozal Project

...AFRICA NAZARENE UNIVERSITY MBA 808 – PROJECT MANAGEMENT A CASE STUDY OF: MOZAL PROJECT - INTERNATIONAL INVESTMENT IN AN UNDERDEVELOPED COUNTRY PREPARED BY: JARED OSORO NYAKANG’O NO: 14J03DMBA014 PREPARED FOR: DR. BWIBO ADIERI LECTURER 7th MARCH, 2014 CASE STUDY MOZAL PROJECT - International Investment in an underdeveloped Country Question 1 Summarize the issues and factors that posed risks to the Mozal project. The Mozal project faced a myriad of risks. Some of these are: 1. Infrastructural Issues a) Poor rail and road network b) Run-down harbor for importing raw materials and exporting final products c) Lack of sufficient electricity for the project d) Lack of sufficient border agents for faster clearance of either the raw materials into or finished products out 2. Project Site issues The site of the project also posed some risks a) It was inaccessible in b) The area residents did not have the construction skills required for the project c) Language Barrier between the locals and the expatriates d) The site area was invested with Mosquitoes e) The area lacked basic facilities like health and educational centers. 3. Resistance The project was likely to face resistance from two quotas within Mozambique; From authorities and from the local community. This can result when there is no enough communication or when the people can see it as not aligned to their interests. 4. Lack of Cross-border Relations and Agreements Lack of......

Words: 1197 - Pages: 5

Premium Essay

International Communications Case Study

... Chapter 12 Case Study Dennis P. Furey, Jr. ML 5313 Project Management March 28th, 2014 Communication Errors According to the Case Study 2 identified as International Communications (Clements & Gido, 2012, pp. 426-428) in Chapter 12 of the text, the project manager, Samuel, appeared to make numerous errors with his communication process or his lack thereof. Angelique, the plant manager in charge of the newly developed Ireland facility that Samuel’s company was designing and constructing, was never able to make contact with Samuel when she needed information, follow-up, or to discuss necessary changes. A large factor that played into the issue was that there appeared to be no beneficial communication plan in place for this project. This was an international job and would need to have sound, precise communication in place in order to be successful. Another issue with Samuel’s communication was his derogatory, stereotypical remarks about women work associates, either behind their backs or to the face of other employees, such as his own female administrative assistant, Penny. By stereotyping the female workers, Samuel was being unethical and caused a shadow of unprofessionalism to bear over him, which would reflect on himself as a project manager and his team. One last major error the researcher observed from the case study was that Samuel ultimately shut down communication from the onset just through his general business practices and mentality. Samuel stated in......

Words: 845 - Pages: 4

Premium Essay

Ruritanian Project

...The Ruritanian Project Your company, which is headquartered in the United Kingdom, is considering setting up a new manufacturing facility in Ruritania. Ruritania is a politically stable, economically developing Eastern European country. Although, last year, the annual growth rate was only 0.7%, the annual growth rate has averaged around 6% per annum over the last five years. The rate of price inflation has been stable, averaging 5.2% per annum over the last five years. Although Ruritania does not have a long tradition of democracy, Governments have been democratically elected for the last twenty years and new elections are due in Ruritania in approximately nine months’ time. There are two major political parties in Ruritania and recent opinion polls suggest that the present Government currently enjoys a 7% lead over the other major party. This opinion poll lead has remained reasonably stable for the last eight months. The other major party is also committed to democratic principles and a market based economy although, if elected, it is likely that they would increase both corporate and personal taxation to provide additional funding for their proposed social expenditure. The Crown (the currency of Ruritania) traditionally had a centrally managed exchange rate, but the Ruritanian Government allowed the Crown to float freely about twelve years ago. This, initially, resulted in a fairly large drop in the value of the Crown, but the Crown has enjoyed reasonable......

Words: 536 - Pages: 3

Premium Essay

International Project Finance

...International Project Finance Globalization, large scale production and chains of multinationals have become very common in today’s world. Due to this, any business that has to survive and compete with others on a global level has to come up with new and innovative projects to give it an edge above its competitors. Here, we are not talking about projects on a small or medium scale. We are talking about huge multimillion dollar investments in a large scale project as only then can a business make its mark on the world economy. The main cause of people hesitating to do such huge projects is that they do not have enough financial back up to go through with plans involving such huge investments. Since, in the end, every brilliant project plan is dependent on the finance required to carry it through, financing of such a project becomes the primary concern of any planner. The financing must be done prudently so that the best of the financial instrument can be used while the negatives avoided as far as possible. Every financial instrument is applicable for certain projects. Choosing such instrument should be the focus of any project since the project will only remain on paper and never be carried out unless there is financial aid. In the present day, there are many unique financial law solutions for funding large scale projects. Following are some of them described in brief: * Project Finance Loans: Project Finance is a kind of loan structure wherein the repayment is......

Words: 6674 - Pages: 27

Premium Essay

International Finance Case

... | |The size of the positions can also be underlined by the fact that in January and February 1995, Barings Tokyo and London | |transferred US$835 million to its Singapore office to enable the latter the meet its margin obligations on the Singapore | |International Monetary Exchange (SIMEX). | |Reported activities (Fantasy) | |The build-up of the Nikkei positions took off after the Kobe earthquake of January 17. This is reflected in Figure 10.1 - the | |chart shows that Lesson's positions went in the opposite direction to the Nikkei - as the Japanese stock market fell, Leeson's | |position increased. Before the Kobe earthquake, with the Nikkei trading in a range of 19,000 to 19,500, Leeson had long futures | |positions of approximately 3,000 contracts on the Osaka Stock Exchange. (The equivalent number of contracts on the Singapore | |International Monetary Exchange is 6000 because SIMEX contracts are half the size of the OSE.) A few days after the earthquake | |Leeson started an aggressive buying programme which culminated in a high of 19,094 contracts reached about a month later on | |February 17. ...

Words: 6854 - Pages: 28

Premium Essay

International Marketing Case Study

...DECEMBER 2014 INTERNATIONAL MARKETING STRATEGY – PRE-ISSUED CASE STUDY & GUIDELINES Important notes for candidates regarding the pre-prepared case study The case study is designed to assess knowledge and understanding of the International Marketing Strategy syllabus in the context of the relevant case study. The examiners will be marking candidates’ scripts on the basis of the questions set. Candidates are advised to pay particular attention to the mark allocation on the examination paper and to plan their time accordingly. Candidates should acquaint themselves thoroughly with the case study and be prepared to follow closely the instructions given to them on the examination day. Candidates are advised not to waste valuable time collecting unnecessary data. The cases are based upon real-life situations and all the information about the chosen organisation is contained within the case study. As the case represents a real-life situation, anomalies may be found in the information you have before you. Therefore, please state any assumptions you make that are reasonable when answering the questions. Remember, you are going to be tested on your overall understanding of the case issues and your ability to answer the questions that are set in the examination. In order to prepare for the examination, candidates will need to carry out a detailed analysis of the case material ahead of the examination. Candidates will have sufficient time during the examination to answer all the questions...

Words: 2501 - Pages: 11

Premium Essay

Corporate International Finance Ch.2 Case Studies

...exporting to Thailand. This is because most of the U.S. firms exporting roller blades to Thailand invoice their products in U.S. dollars. If the baht depreciates, Thai importers will have to convert more baht to dollars in order to pay for the dollar-denominated exports 5. If Blades increases its business in Thailand and experiences serious financial problems, are there any international agencies that the company could approach for loans or other financial assistance? ANSWER: An agency extending direct loans to corporations involved in international trade is the International Financial Corporation (IFC). Besides extending loans, the IFC may also purchase stock in a corporation, thereby becoming part owner.  Solution to Supplemental Case: Maple Leaf Paper Company This case reflects the actual experience of a Canadian exporting firm (although the name and industry have been changed) to the free-trade agreement on January 2, 1989. The appreciation in Canadian dollars (resulting from the agreement) offset the tariff, so that the firm was no better off with the free-trade agreement. The case shows that the effects of free trade are not always so obvious and may differ across firms.a.While the tariff allowed for a 12 percent decline in price, the U.S. clients will have to pay more dollars to obtain Canadian dollars in the future, based on the forecast of the exchange rate. The exchange rate is expected to rise by 13.15percent. Given that the 12 percent tariff is......

Words: 941 - Pages: 4

Premium Essay

Finance Case Study

...bru6171X_case02_023-038.qxd 11/24/12 2:24 PM Page 23 CASE 2 Bill Miller and Value Trust Bill Miller’s success is so far off the charts that you have to ask whether it is superhuman. Quite simply, fund managers are not supposed to be this good. Is it mortal genius, or is it celestial luck?1 By the middle of 2005, Value Trust, an $11.2-billion mutual fund2 managed by William H. (Bill) Miller III, had outperformed its benchmark index, the Standard & Poor’s 500 Index (S&P 500), for an astonishing 14 years in a row. This record marked the longest streak of success for any manager in the mutual-fund industry; the next longest period of sustained performance was only half as long. For many fund managers, simply beating the S&P 500 in any single year would have been an accomplishment, yet Miller had achieved consistently better results during both the bull markets of the late 1990s and the bear markets of the early 2000s. Over the previous 15 years, investors in Value Trust, one of a family of funds managed by the Baltimore, Maryland–based Legg Mason, Inc., could look back on the fund’s remarkable returns: an average annual total return of 14.6%, which surpassed the S&P 500 by 3.67% per year. An investment of $10,000 in Value Trust at its inception, in April 1982, would have grown to more than $330,000 by March 2005. Unlike the fund’s benchmark, which was a capitalization-weighted index composed of 500 widely held common stocks, Value Trust only......

Words: 10398 - Pages: 42

Premium Essay

Case Study- International Management

...Intercultural Management – Case study 1. Brief summary of the case The text describes the business activities and the development of a seven-headed Taiwanese family named Teng. Their field of activity includes a drygoods store from the very early beginning and later on the family business was accredited as official dealer of products of a Swedish motor manuacturer (Swedsa) in Taiwan who brought richness and success for the Tang family. In general the educational levels between the family members are completely different but everyone tries one’s best. After a business study one son proposed to reorganize the family business in order to progress the bad financial situation by giving fixed areas of responsibility to each member who did not bring the expected success. // The case talks about a family business in Taiwan having problems to adapt to changing conditions concerning business thinking, globalization and modern strategies. They aren’t competitive anymore. On the one hand they form a corporate business with a Swedish company on the other hand they miss to open up their strict traditional views so in the end they have to face that profits stagnate. 2. Problem statement The problem in this case is the difficult compatibility of business and family in one company. // Family vs. business ( Family is more important than the success of business The organigram of the company structure underlines this statement because all leading positions are equally divided......

Words: 1995 - Pages: 8

Premium Essay

International Logistics Case Study

...GFML 3053 INTERNATIONAL LOGISTICS CASE STUDY ASSIGNMENT 1 GROUP B ------------------------------------------------- LECTURER: Assoc. Prof. Dr. Nik Ab Halim Nik Abdullah ------------------------------------------------- NAME: Nor Fadilah Binti Anwari MATRIC NO.: 234866 Answer 1 Mali’s mango industry faced many problems which are poor transport connections, small markets and lack in managing organization and technical assistance. Poor transport connections of sea shipment logistics because it is land-locked countries and the exportation of mangoes to the small market of air-freighted was less efficient to supply fresh mangoes from Mali to Europe. The high cost of air-freight was impeding the expansion of production and export. Other than that, producers lacked in organization, extension services were non-existent and no incentives to private operators were given. Moreover, other problem is the little or no technical assistance provided to the farmers due to mangoes are cultivated by smallholders that only representing less than five hectares of the plantations. Apart from that, full payment to the farmers was often haphazard. This arrangement resulted in little investment in the horticultural sector specifically in the plantations sector and difficult in finding an investors for the export of perishables from land-locked countries. As a consequence, grower revenues diminished significantly with current yields estimated at only 20% of the export......

Words: 850 - Pages: 4

Premium Essay

International Studies in Banking & Finance

...AFX 5860 Assignment International Studies in Banking & Finance Visit 1: UN Food and Agricultural Organization [pic] Place: Rome Italy Brief Introduction: The Food and Agriculture Organizaiton of the United Nations (FAO) is a special agency of the United Nations that leads international efforts to defeat hunger. FAO acts as a forum where all nations meet equally to negotiate agreements and debate policy, it also a source of knowledge and information which help developed and developing countries in transition modernize and improve agriculture, forestry and fisheries practices and ensure good nutrition for all (FAO, 2010). Rome Italy is head quarters. It has 191 member states as well as Europe Union and the Faroe Islands, which are associated members (FAO, 2010). FAO is composed of 8 different departments, the meeting is conducted by finance division. Relevant Key Points & Issues The fist half of the presentation briefly introduced the FAO’s role as UN’s agency, its structure, business environment and management. FAO’s mandate is contribute to the growth of world economy and to increase the level of nutrition, with the mission of helping build a food secure world. In order to achieve such mandates, they involves 4 activities which are putting information within reach, sharing policy expertise, providing a meeting place for nations and bringing knowledge to the field. It used result- based management which is an approach that integrates strategy, people,...

Words: 5165 - Pages: 21

Premium Essay

Denvor International Case Study

...In the case of the Denver International Airport (DIA) project, dysfunctional decision making contributed to its demise. The airport's baggage handling system was a critical component in the plan and with its multiple failures ended up as a deal breaker for the project. By automating baggage handling, aircraft turnaround time was to be significantly reduced. Faster turnaround time meant more efficient operations and was a basis of the airports competitive advantage. Although there was good energy and enthusiasm surrounding the launch of the project, the project faced many complications and delays of over a year. The first critical factor that caused setback was when the project management team changed their strategy to include an integrated baggage handling system. Another critical factor that the project team allowed was the acceptance of change requests one the baggage project was underway. One final major factor that contributed to the failure was in the physical design plans. The project management had assumed that individual airlines were going to make their own baggage handling arrangements. This assumption in the initial project plan did not bode well for the team. Once into the project, they realized that other airlines were not coming forward to develop their own baggage systems, this was when the idea occurred to implement an integrated baggage-handling system. Without this initiative in play, the airport was more likely to have carried out its......

Words: 1829 - Pages: 8