Finance and Value Creation
Marlo Thomas
Capella University
Unit 1 Assignment 1
Article Review 1
February 24, 2013
As corporations globalize, they face many financial challenges. The major challenges faced by the Global CEO is giving corporations a powerful mechanism for arbitrage across national financial markets as capital markets open up with them while managing their internal markets to build an advantage. CFOs have to balance opportunities, the long-established questions which arises due to the globalization and the challenges of operating in multiple environments. By utilizing their internal capital markets, CFO can produce value in three functions: managing risk globally, global capital budgeting and financing the internal capital market.
The existence of an internal capital market also broadens a firms risk management options. Instead of overseeing all money exposures through the financial market, global firms can compensate natural currency exposures through their global operations. Given this potential for minimizing risk, it might seem safeguard that many multinationals let local subsidiaries and regions supervise their risks separately. Doing so, however can make it difficult to understand the performance of local units, making it harder for headquarters to assess local managers and easier for financial managers to take purely speculative positions.
With global capital budgeting CFOs can add value by getting smarter about valuing investing investment opportunities. While adopting an overly formal approach, could tempt managers in order to improve the quality valuations, the gaming that takes place can undermine the company’s strategies. By adopting a narrowly financing approach can lead to an outcome directly at odds with the company strategic objectives. Firms should make sure that their finances professionals actively discuss potential risks with the country mangers who best understand them.
Financing the internal
Capella University
Unit 1 Assignment 1
Article Review 1
February 24, 2013
As corporations globalize, they face many financial challenges. The major challenges faced by the Global CEO is giving corporations a powerful mechanism for arbitrage across national financial markets as capital markets open up with them while managing their internal markets to build an advantage. CFOs have to balance opportunities, the long-established questions which arises due to the globalization and the challenges of operating in multiple environments. By utilizing their internal capital markets, CFO can produce value in three functions: managing risk globally, global capital budgeting and financing the internal capital market.
The existence of an internal capital market also broadens a firms risk management options. Instead of overseeing all money exposures through the financial market, global firms can compensate natural currency exposures through their global operations. Given this potential for minimizing risk, it might seem safeguard that many multinationals let local subsidiaries and regions supervise their risks separately. Doing so, however can make it difficult to understand the performance of local units, making it harder for headquarters to assess local managers and easier for financial managers to take purely speculative positions.
With global capital budgeting CFOs can add value by getting smarter about valuing investing investment opportunities. While adopting an overly formal approach, could tempt managers in order to improve the quality valuations, the gaming that takes place can undermine the company’s strategies. By adopting a narrowly financing approach can lead to an outcome directly at odds with the company strategic objectives. Firms should make sure that their finances professionals actively discuss potential risks with the country mangers who best understand them.
Financing the internal