Managing a business or any other organization in the modern world involves several challenges. It is important to understand the forces behind globalization and the implications of globalization in management. Globalization is driven by the advancement in technology, removal of barriers to cross-border trade, among other forces. A multinational firm must understand these dynamics to enable to adapt promptly to global changes. The international financial system consists of the foreign exchange market, the international bond market as well the derivative market. The forex market involves the exchange of foreign currencies while the derivative market involves derivative financial instruments such as options, futures, forward contracts, among other financial instruments (Madura, 2016). A multinational corporation faces several risks such as the fluctuation of exchange rates, interest rates, among other risks. Exchange rate fluctuation may lead to the fall in the values of assets or an increase in the value of liabilities as well as affecting the competitiveness of the company. A manager should understand how these risks affect the business and understand appropriate measures to mitigate such risks. Accomplishing the terminal course objectives will enhance my management skills by improving the understanding of the functions and dynamics of the international financial system, understanding the risks facing multinational corporations and measures to mitigate such risks as well as improving the ability to make sound decisions relating to the international financial market (Madura, 2016).
A manager can subject its firm to several risks if he/she has not mastered the terminal course objectives. Firstly, a manager who does not understand the forces behind globalization and their implications will not make sound decisions. He will not be able to proactively take measures to enable his firm to adapt to globalization. Secondly, understanding the operation international financial system enables the firm to develop appropriate strategies for international financing sources (Madura, 2016). This may lead to higher cost of financing among other disadvantages. Besides, the manager would not be able to understand the risk facing his multinational firm. If a manager is not able to understand, identify, measure and take appropriate risk-mitigating measures, the firm can suffer huge losses. A manager should be able to measure the foreign exchange risk and hedge the risk through options, among other derivative financial instruments to avoid losses in the values of assets such as accounts receivables, as well as the increase in liabilities such as accounts payable and loans (Madura, 2016).
References
Madura, J. (2016). International financial management (13th ed.). Mason, Ohio: Cengage
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