International Financial Management

1. Global Financial Context
International Financial
Management

2. Why Study International
Finance
• In today's world finance
anything but international
cannot
be
• Enormous growth
international trade
volume
of
in
the
• Cross border capital flows and, in
particular, direct investment have also
grown enormously

3. • Veritable ( Genuine) revolution has been
taking place in the money and capital
markets around the world
• Liberalization, integration and innovation
have created a giant international financial
market which is extremely dynamic and
complex

4. • Multilateral negotiations regarding phased
removal of trade barriers have made
considerable progress and WTO had emerged as
a meaningful platform
• Post war, World trade has grown faster than
World GDP
• Almost all countries getting integrated with
the global economy

5. • For those who are willing to master its
complexities the global financial market
provides endless opportunities for creative
financial management
• Finance managers must come to grips with
with the conceptual foundations and
practical issues of instruments and markets

6. The Finance Function
• The finance function in a firm can be
conveniently divided into two subfunctions viz. accounting and control
and treasury management
• Decisions taken by the treasurer have
implications for the controller and vice
versa

7. The Finance Function (contd.)
• Treasury Function: Acquisition and
allocation of financial resources so as
to minimize the cost and maximize the
return, consistent with the level of
financial risk acceptable to the firm is
the core of treasury management
• Accounting and Control: Internal and
External Reporting, MIS, Control, etc.

8. The Emerging Challenges
• Five key categories of emerging challenges
can be identified
– To keep up-to-date with significant
environmental changes and analyze their
implications for the firm
– To understand and analyze the complex
interrelationships
between
relevant
environmental variables and corporate
responses

9. The Emerging Challenges (contd.)
– To be able to adapt the finance function
to significant changes in the firm's own
strategic posture
– To take in stride past failures and
mistakes to minimize their adverse
impact
– To design and implement effective
solutions to take advantage of the
opportunities offered by the markets and
advances in financial theory

10. Recent Challenges in Global
Financial Markets
• The outstanding feature of the changes
during the eighties was integration
• Both the potential borrower and the
potential investor have a wide range of
choice of markets

11. • Deregulation
within
the
financial
systems of the major industrial nations
• Assets
denominated
in
currencies
became
more
substitutable
various
nearly

12. • Deregulation involved action on two fronts
– Eliminating the segmentation of the markets
for financial services
– permitting foreign financial institutions to enter
the national markets and compete on an
equal footing with the domestic institutions

13. What’s Special about
“International” Finance?
•
•
•
•
Foreign Exchange Risk
Political Risk
Market Imperfections
Expanded Opportunity Set

14. What’s Special about
“International” Finance?
• Foreign Exchange Risk
– The risk that foreign currency profits may
evaporate in dollar terms due to unanticipated
unfavorable exchange rate movements.
• Political Risk
– Sovereign governments have the right to
regulate the movement of goods, capital, and
people across their borders. These laws
sometimes change in unexpected ways.

15. What’s Special about
“International” Finance?
• Market Imperfections
– Legal restrictions on movement of
goods, people, and money
– Transactions costs
– Shipping costs
– Tax arbitrage

16. What’s Special about
“International” Finance?
• Expanded Opportunity Set
– It doesn’t make sense to play in only
one corner of the sandbox.
– True for corporations as well as
individual investors.

17. Multination Corporations in
Pakistan
Multination companies are believed to influence the lifestyle
and the mindset of the people of the home country by
importing ideas, occasion and a perceived lifestyle. These
factor not only effect the population but also the business
activity and processes. Whereas the Marketing and
Advertising imitative Is at the fore front of bring about this
change.
Definitely, Pakistan has also seen a serious change in
trends. A major share of credit goes to the multinational
companies in Pakistan who have either been function for
long time or newly setup their infrastructure.

18. Multination Corporations in
Pakistan
The marketing campaigns also indicate the expansion of
the already present MNCs in Pakistan to solidify their
roots in terms of their cultural association, brand image
and target market.
Normally, an MNC preferably sets up an infrastructure of a
minimum 60,000 sq ft per area, in order to ensure that the
basic requirement of production plans, administration and
management setup is accommodate for a long terms
operation in Pakistan.

19. Speaking of the latest marketing trends by the
Multinational corporations in Pakistan, we have seen a
drastic improvement from the times of PTV to the
present wide and rather more influential private
channels network. For example in the FMCG, Unilever
is one of the top names as it has a huge lines of
products in different categories and the spending in on
advertising and media in terms of budget is massive.
Unilever has completely shifted its gears from
conventional marketing and advertising practices to
focusing on sustainable living in almost all the product
categories. From a check mode of CSR, to a highly
proactive initiative at present.