Question

Explain ten recommendations for multinational companies who are either currently operating in Venezuela or may be interested in establishing operations in Venezuela. Provide justification for recommendations.

Answer 1

The crisis in Venezuela has intensified over the last few years as commodity shortages, civil unrest and political clashes have intensified.

Recommendations

1. Managing the size of balance sheet exposure - Balance sheet exposure of subsidiaries should be reduced when planning to expand operations in this region.

2. Adoption of Risk management practices - Risk management department must be proactive in approach.

3 Foreign exchange assets to be managed effectively - Companies must adopt proper risk management practices for management of currency and translation risk due to devaluation of relative currency.

4. Using proper index based indicators - As evident from the past At least 64 S&P 500 companies — around 13 per cent of the total — posted regulatory filings warning investors of write-offs or exposure to asset devaluations as the bolivar continued to lose value against the US dollar.

5. Material management and handling to be managed

6. Exposure to cyclicity of political changes -.A bet on a long-term profitability market in Venezuela. Energy firms appear to enjoy more favourable operating conditions — as the Venezuelan government is seeking to protect its main industry — and are locked in longer-term and greater capital projects that are less vulnerable to the cyclicality of political changes by their design..

7. Compliances to be maintained as per internal reforms.

8. Subsidiaries listed on exchanges to be compliant with regulatory parameters.

9.Trading Across Borders- Trading across borders is a costly and time-consuming task. import, costing more than double the OECD average and far more than in other Latin American nations.

10.Enforcing Contracts and Resolving Insolvency