Question

Why is global risk management such an important requirement for companies operating in foreign markets? Select the most current financial statements of a U.S. multinational corporation (MNC), list the various methods of risk management included in their policy. Do you think these methods are effective in global risk management? Support your answer.

NOTE: Go to the MNC's website, Search for "Investor Relations" and you will find financial statements there. Choose annual reports for the fiscal year end 2014, 2015 or 2016. You can also use theSEC's Edgar database to conduct a public company search: https://www.sec.gov/cgi-bin/srch-edgar

Answer 1

Taking risk is an integral part of the companies

The Companies faces risk from external and macro environment in various forms that too a multi national company operating in more than one country faces so many risks namely political, economical, financial etc,

Some Risks involves financial matters affect the company’s decision making difficult to make.

Companies has to come up with various methods in managing such risks like low cost productive techniques to minimize production costs and low cost production areas to minimize wages.

Companies operating in foreign territory has to face competition from local markets and reputedly established local players which is one of the major concerns the reasons being the area of operation and the tastes and requirements of the consumers is very well known to the local competitors.

Resources are abandonee and can be cheaply available and there may be political factors to take advantage of such resources in order to overcome such risks companies has to make effective strategic decisions to overcome such barriers

The concept of risk management is not really so small.

Risk management implies significant limits on the ability of highly leveraged financial institutions such as banks to provide badly needed venture capital; it implies that financial systems need more than banks

It is fundamental to sound banking and requires a revolution in many of the world’s banking systems.

Risk exists and banks must accept risk if they are to thrive and meet an economy’s needs.

But they must manage the risks and recognize them as real Risk matters.

Whether or not it is temporarily ignored, it will eventually come out.

Recognizing that fact and dealing with it will benefit lending institutions and the economies in which they operate.

Indeed, given globalization, must adopt increasingly sophisticated risk management practices in the years ahead.

Companies often adopt various techniques to avoid or to deal with such risks.

Firstly companies has to prioritize such risk and from there an companies has to decide whether to move on or to face the challenge or to plan what to do next.