Conduct an initial country risk analysis for each country (India and Brazil)in your selected scenario. Include the following risk analyses:
a. Translation exposure (Brazil and India)
b. Socio-economic (Brazil and India)
Based on your analyses, describe the appropriate techniques and procedures for mitigating the risks you identified for the countries in your selected scenario. Interpret the results of your analysis using qualitative and quantitative techniques, such as forward market hedge, money market hedge, and options.
Be sure to properly cite the source(s) of the data that you used for your calculations. If you used an electronic source, include the URL. If you used a printed source please attach a copy of the data to your paper.
Country Risk Analysis
Under foreign exchange risk the translation exposure has been a crucial issue for corporate irrespective of there level of net equity.
For any corporation a translation exposure can be defined as the company's net foreign investment exposure held in the foreign currencies and need to be translated into its reporting currency at the end of financial reporting period of that corporation.
If we look at the translation exposure, it remains a non-cash item in balance sheet with its exposure in other comprehensive income or the net equity until the asset is sold. Also it has no impact on the profit and loss account or earnings per share (EPS) until the asset is sold.
In the recent years an amplified volatility in the INR-US exchange rates can be seen. This volatility is mainly due to the global economic downturn and increased dollar-inflows into the Indian stock markets through the window of FII.
If we look at the law and regulation ...
The solution analyzes a country risk analysis for India and Brazil. The translation exposure and Socio-economic of Brazil and India are determined.