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Forex
Economic
Exposure Multidimensional Ripples
--
GRK Murty
Any
business unit faces foreign exchange risk in three waystransaction
risk, translation risk and economic risk. Contrary to
the common notion, economic exposure has a significant
impact not just on companies with foreign exchange exposures
but on all companies in general. With the ripple effect
of economic changes in one part of the world being widely
felt in another part, economic risk has become a focus
of discussion in today's globalized world. It is highly
essential that risk managers take-up adequate steps
to identify and insulate against economic risks if the
companies' operations are not to be adversely affected.
What role does economic exposure actually play in forex
risk? Learn the answer.
© IUP. All Rights Reserved.
Treasury
The
Power of American MNCs
--
C
P Chandrasekhar and Jayati Ghosh
The
recent release of the preliminary results of the 1999
benchmark survey of US direct investment abroad (Survey
of Current Business, April 2002) by the Bureau of Economic
Affairs of the US Ministry of Commerce, enables an assessment
of the expansion and restructuring of the operations
of US multinationals during the years of globalization.
According to the data, it is in developing countries
that the US MNCs account for a significant share of
the host GDP, while global FDIs are predominantly to
the developed nations. The authors assess the degree
to which the evidence supports conventional perceptions
of the role of multinationals and the impact of their
operations on developed and developing economies.
©
Business Line, May 14, 2002. Reprinted with permission.
New
Partnerships in Cash and Treasury Management --
Michael Hogan
Today,
the Cash and Treasury marketplace in Asia-Pacific is
undergoing a sea change. Consolidation in the financial
services industry has led to fewer, bigger players while
investment in technology has become costly and hard
to come by. In addition, the old business models no
longer hold good. Bankers have been forced to think
in a different mode and consider doing things that they
would not have touched earlier. With outsourcing becoming
the order of the day, banks today have crossed over
from being sellers of cash and treasury products to
being serious buyers as well. As the search of new solutions
continues, old adversaries are increasingly becoming
friends and partners to survive in this tough world.
©
PPP Company Limited and HSBC Global Payments and Cash
Management. Originally published in HSBC's Guide to
Cash and Treasury Management in Asia Pacific 2002. Reprinted
with permission.
Reining
in SPEs
--Andrew Osterland
In
the aftermath of the Enron debacle, the words "special
purpose entities" are immediately being equated
to fraudulent activities by many a common man. However,
SPEs, as widely perceived today, are not just the little
toys used by unscrupulous professionals at high-flying
companies for defrauding investors . These entities
are widely used by quite a few US companies, across
a range of industries, for legitimate purposes that
are equally diverse. FASB has got down to writing new
rules early this year to ensure that unconsolidated
SPEs are completely independent from the sponsoring
companies. Unfortunately, companies that use SPEs for
legitimate purposes will pay the price for the sins
of others.
©
CFO, May 2002. Reprinted with permission.
The
Limits of Bank Convergence
--Alastair J Cairns, Jonathan A Davidson, Michal L Kisilevitz
Competition
in the US banking industry is reaching astronomic proportions.
With the repealing of Glass-Steagall Act in 2000, the
final barrier for integration of commercial and investment
banking was effectively removed. A far reaching development
in this regard is that investment banks are being forced
to lend to their customers, an activity hitherto unknown
to them. And commercial banks are increasingly gaining
market share in investment banking business, especially
with respect to debt products. However, the notion that
convergence between investment banks and commercial
banks is inevitable suggests a reading of short-term
trends says McKinsey. The game is far from over, and
the only certain thing is that, the winners will have
top-tier investment banking experience.
©
The McKinsey Quarterly, 2002 Number 2 (www.mckinseyquarterly.com).
Copyright 2002, McKinsey and Company. All Rights Reserved.
Reprinted with permission.
What
Type of Recovery?
--Michael
Burke
Signs
of economic revival are visible in America. The belief
that America is all set to witness the wonder years
again has been cemented with the Federal Reserve Chairman,
Alan Greenspan stating that, he also expected a rebound
in the economy soon. However, while everybody is trying
to spot the silver lining around the dark clouds, the
corporate world remains moribund and continues to caution
the investors and the analysts about the prospects of
individual firms. According to analysts, the main factors
that can help the economy rebound are consumer spending,
government spending and the business investment. Only
time will tell, whether the American economy will rebound
in near future or not.
©
Profit & Loss, April 2002. Reprinted with permission.
Risk
There's
No Time Like The Present
--
Peter
Russell, Nathan Reeve
Almost
similar to FAS-133, FAS-115 and FAS-140, IAS-39 deals
with accounting of financial assets and liabilities
as well as derecognition, in addition to the accounting
for derivatives. IAS-39 has significant business implications
in that, all financial assets and liabilities will be
recognized on the balance sheet and certain instruments,
including derivatives, will have to be recorded at fair
value. Hedge accounting is also permitted under IAS-39
provided certain guidelines are met. Unfortunately,
the standard heightens the potential for existing risk
management strategies to increase earnings volatility.
Although compliance with IAS-39 seems to be a long way
off, corporates must start planning right now to ensure
that there are no surprises when it is complied with.
©
The Treasurer, March 2002. Reprinted with the permission
of the Association of Corporate Treasurers (ACT) (www.treasurers.org).
All Rights Reserved.
FAS-133:
A New Solution?
--
C
Anita
Risk
management is taking a new dimension these days with
individuals using derivatives of some kind to hedge
their risk. Earlier, companies did not disclose their
exposure to derivative contracts and were in a soup
when the tide turned against themthe worst example being
that of Long-Term Capital Management. However, FASB
introduced a new norm FAS-133 in 1998 with effective
implementation from June 2000 to protect investors from
unseen derivative exposures that companies do not disclose
in their statements. What is FAS-133? What are the guidelines?
How does it help the investor? Read on the answers.
© IUP. All Rights Reserved.
Risk
Management in Retrospect
Emerging
Economies The Argentine Dilemma
--
E
Kalyan Babu
The
recent years have witnessed a spate of crises in emerging
economiesBrazil, Mexico and South East Asia immediately
spring to mind. The classic example that can be quoted
today in this regard is that of Argentina, which ended
up with the largest ever sovereign debt default of $155
bn in December 2001. Let us have a look at how the crisis
in Argentina unfolded.
©
IUP. All rights reserved.
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