Explore BrainMass

Economic Risk Assessment

Need help with conducting an initial country risk analysis for Brazil and India in regards to:
Economic exposure
Translation exposure
Transaction exposure

© BrainMass Inc. brainmass.com July 19, 2018, 3:39 pm ad1c9bdddf

Solution Preview

Economic exposure:
The economic exposure depends on fluctuating exchange rates and thee can affect the company's foreign investments, cash flow, and company earnings. The country's economy is strong. It was rated by the World Economic Forum as the country in 2009 gaining eight positions among other countries. Brazil has strong competitive fundamentals and provides for a good economic environment for the private sector.
The economic exposure of Brazil is most impacted by the fluctuations in currency rates. However, when we take a long term perspective, the Real was $0.3 in August 2002 but now on September 17, 2011 it has climbed to $0.62. There have been downward fluctuations. For instance in 2008 from a peak of $0.62, the rate dipped to 0.41. Such fluctuation can increase the economic risk to very high levels. Overall however, the Real is moderately stable. We conclude that the economic risk is moderate.
Translational exposure:
This is the risk that a firm's equities, assets, liability or income will change in value as a result of exchange rate changes. This occurs when a firm denominates a portion of its equities, assets, liabilities or income in a foreign currency. The rating of the Real by Moody is B1 and S&P rating is BB-
When we consider the fluctuation of the Real during the last one year, we find that exactly on 17th September 2010 the exchange rate of Real was $0.59 and this has increased during the year ...

Solution Summary

This solution gives you a detailed discussion on Economic Risk Assessment