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In: Finance

How do global firms manage the global financial environment and the foreign exchange market in terms...

How do global firms manage the global financial environment and the foreign exchange market in terms of The international monetary system?

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Expert Solution

Global firms manage with the global environment and foreign exchange market in terms of International monetary system by entering into various kinds of business combinations and they are also trying to not just getting exposed to transactions in other countries but they are also taking various kinds of hedging exposures in order to minimise the risk associated with the fluctuations of the exchange rate in the International monetary system.

When the Global firms are exposed to large number of transactions within the Global community, then these firms should be regularly trying to hedge with their foreign exchange risk by eliminating their transaction risk and translation risk and they are also entering into various kinds of business combinations like mergers and amalgamation or taking significant influence of other entities in other countries or they can also start production facilities in order to eliminate the effect of changing interest rate in that particular country so these global financial companies are evolving in order to eliminate the risk of fluctuating exchange rate by either taking various kinds of foreign exchange contracts which are providing them with absolute hedge and they are also interesting into various kinds of businessem combination with each other which will be providing adequate help for these financial organisations to mitigate the risk of fluctuation in the International monetary system.


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