What are the financial risks (for a company) of conducting business internationally. Please explain the significance of foreign exchange rate risk and how this risk can be mitigated
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Conducting international business anywhere comes with great risk, especially when specifically looking at financial risk which would involve exchange rate risk.
In general, financial risk for a company in the international business environment can come in many different forms. Examples may be associated with failure to succeed or meet expectations in the market place and thus profits are low. This lack of profits may mean longer term losses and the inability to recover investments until a later date than initially predicted. This would mean longer time spent reaching the breakeven point from profits not meeting initial investment costs and at the same time not covering operating costs.
This however may be rectified by marketing methods to penetrate the market better, informing the customers of the existence of the company and persuading to act favorably towards the company. This sometimes is just simply a matter of time taken to build business relationships with locals, and establishing the company's products for ...