Risk Mitigation

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Xhzzvr108

Business Finance

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For this second milestone, you will analyze risk mitigation strategies for your selected company. Additionally, you will calculate the impacts foreign currencies have on the overall revenue and profit structure of your selected company.

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Final Project Milestone Two Spreadsheet: Foreign Currency Impact Step 1) Pull annual financial statements for your selected multinational firm for the last three years. Find overall company rev Step 2) Pull the yearly average exchange rate between USD and each subsidiary's currency. To find historical data, go to http: Step 3) Go to http://www.xe.com/currencytables/. Select December 31 and use it as the average yearly exchange rate for the year (not exactly correct, but average yearly rate r Step 4) Calculate the impacts of the subsidiary revenue on the overall and company revenue. Step 5) Calculate Scenario #1: Appreciate Dollar by 5%. What would happen to revenue from the subsidiary—would it increas Step 6) Calculate Scenario #2: Depreciate Dollar by 5%. What would happen to revenue from the subsidiary—would it increas Note: Although the spreadsheet is set up for three subsidiaries, your company might only have one, which is fine. More than STEP 1: REVENUE TABLE STEP 3: CALCULATE IMPACTS 201# 201# STEP 2: AVERAGE YEARLY EXCHANGE RATE 201# 201# 201# YEAR 201# 201# 201# Overall Company Revenue Subsidiary 1 Revenue Subsidiary 2 Revenue Subsidiary 3 Revenue YEAR 201# USD Subsidiary 1 Local Curr Appreciate Dollar Currency 5% YEAR 201# 201# 201# Appreciate Dollar Currency 5% YEAR 201# 201# 201# mpact rs. Find overall company revenue and revenue for the subsidiary you have chosen to analyze. d historical data, go to http://www.xe.com/currencytables/. ct, but average yearly rate requires extra payment). subsidiary—would it increase in USD terms or decrease in USD? subsidiary—would it increase in USD terms or decrease in USD? ne, which is fine. More than one is better, but the maximum should be three. TEP 3: CALCULATE IMPACTS OF SUBSIDIARY REVENUE ON TOTAL REVENUE Overall Subsidiary 1 Rev Subsidiary 1 Rev Revenue in in Local Curr in USD USD % of Subsidiary % of Subsidiary Revenue From Subsidiary 2 Rev Subsidiary 2 Rev Revenue From Total Revenue in Local Curr in USD Total Revenue (USD) (USD) STEP 4: Scenario #1—Dollar Appreciates 5% ppreciate Dollar Currency 5%. What would happen to revenue from the subsidiary—would it incrase in USD terms or decrease in USD? Overall Subsidiary 1 Rev Subsidiary 1 Rev Revenue in in USD After 5% in Local Curr USD Appreciation % of Subsidiary % of Subsidiary Subsidiary 2 Rev Revenue From Subsidiary 2 Rev Revenue From in USD After 5% Total Revenue in Local Curr Total Revenue Appreciation (USD) (USD) STEP 5: Scenario #2—Dollar Depreciates 5% ppreciate Dollar Currency 5%. What would happen to revenue from the subsidiary—would it incrase in USD terms or decrease in USD? Overall Subsidiary 1 Rev Subsidiary 1 Rev Revenue in in USD After 5% in Local Curr USD Depreciation % of subsidiary % of subsidiary Subsidiary 2 Rev revenue from Subsidiary 2 Rev revenue from in USD After 5% Total Revenue in Local Curr Total Revenue Depreciation (USD) (USD) Subsidiary 3 Rev in Local Curr Subsidiary 3 Rev in USD % of Subsidiary Revenue From Total Revenue (USD) Subsidiary 3 Rev in USD After 5% Appreciation % of Subsidiary Revenue From Total Revenue (USD) Subsidiary 3 Rev in USD after 5% Depreciation % of Subsidiary Revenue From Total Revenue (USD) rms or decrease in USD? Subsidiary 3 Rev in Local Curr rms or decrease in USD? Subsidiary 3 Rev in Local Curr INT 620 Milestone Two Guidelines and Rubric: Risk Mitigation Strategies Overview: For this milestone, due in Module Five, you will analyze risk mitigation strategies for your selected company. Additionally, you will calculate the impacts foreign currencies have on the overall revenue and profit structure of your selected company. Prompt: First, review the annual financial statements (Form 10-K) for your selected company. You can either retrieve the statements from the webpage SEC EDGAR Company Filings or directly from the company’s website, often listed under “Investor Information.” Review the Module Five resources, including the website Historical Exchange Rates, and review the Module Three and Four resources. Next, complete the spreadsheet Milestone Two: Foreign Currency Impact, which analyzes the foreign currency impact on your selected company. To complete this part of the milestone, you will need to review at least three years’ worth of annual financial reports. Finally, complete the Final Project Milestone Two section in the Final Project Template. The paper should outline what hedging techniques your selected company is currently using. You need to research the annual statement and look for foreign currencies and their treatment, the derivative contract specifically used for hedging, and any other notes on hedging in the company’s annual financial statements. Further, you will need to analyze specific foreign currency transactions listed in the financial statements. The following critical elements must be addressed:  Section 2: Risk Mitigation Strategies A. Determine current financial and strategic impacts of international risks to inform risk mitigation strategies. In other words, what kind of risks is your company exposed to (translation, transaction, economic, operating, etc.) and why? B. Explain how to mitigate foreign exchange rate risk. C. Identify the tools the company is currently using to mitigate its foreign exchange risk. This should be done using the annual financial statements. D. Calculate the financial impacts of international foreign exchange risk to inform risk mitigation strategies. This will be done in an Excel spreadsheet. There are instructions in the spreadsheet to guide you step-by-step through the exercise. E. Propose future mitigation strategies based on the prospective market for your corporation including addressing risks that are not currently being efficiently mitigated for your corporation. Be sure to reference your completed Final Project Milestone One document as well as any other pertinent course resources to support your responses. Incorporate instructor feedback on this milestone into your final project submission. Rubric Guidelines for Submission: This milestone should be submitted as a Word document, 2–3 pages in length, double-spaced, using 12-point Times New Roman font, one-inch margins, and the latest edition of the APA manual for formatting and citations. Critical Elements Section 2: Current Impacts Proficient (100%) Determines current financial and strategic impacts of international risks to inform risk mitigation strategies Needs Improvement (70%) Determines current financial and strategic impacts of international risks to inform risk mitigation strategies but is missing key ideas Section 2: Mitigate Foreign Exchange Rate Risk Explains how to mitigate foreign exchange rate risk Section 2: Tools Defends the tools the company is currently using to mitigate foreign exchange risk Section 2: Financial Impacts Analyzes financial impacts of international foreign exchange risk to support risk mitigation strategies Section 2: Future Mitigation Strategies Proposes future mitigation strategies based on the prospective market for the corporation including addressing risks that are not currently being efficiently mitigated for the corporation Submission has no major errors related to citations, grammar, spelling, syntax, or organization Explains how to mitigate foreign exchange rate risk but explanation is incomplete or unclear Defends the tools the company is currently using to mitigate foreign exchange risk but reasons provided are minor, incomplete, or unclear Analyzes financial impacts of international foreign exchange risk to support risk mitigation strategies in a way that is incomplete or unclear Proposes future mitigation strategies based on the prospective market for the corporation but proposal does not include risks that are not currently efficiently mitigated Articulation of Response Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas Not Evident (0%) Does not determine current financial and strategic impacts of international risks to inform risk mitigation strategies Does not explain how to mitigate foreign exchange rate risk Value 18 18 Does not defend the tools the company is currently using to mitigate foreign exchange risk 18 Does not analyze financial impacts of international foreign exchange risk to support risk mitigation strategies Does not propose future mitigation strategies based on the prospective market for the corporation 18 Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas Total 10 18 100% Global Expansion Proposal INT 620 Final Project 1 Contents Final Project Milestone One (Module Three) .................................................................................. 3 Introduction: Company Proposal and Background...................................................................... 3 Introduction: Subsidiary Expansion ............................................................................................ 3 Broad Strokes of the Expansion Plan: Microeconomic and Macroeconomic Factors in Domestic Market ......................................................................................................................... 3 Broad Strokes of the Expansion Plan: Microeconomic and Macroeconomic Factors in Prospective Global Market .......................................................................................................... 3 Broad Strokes of the Expansion Plan: Exchange Rate Regime in Domestic and Prospective Global Markets ............................................................................................................................ 4 Broad Strokes of the Expansion Plan: Impacts of Economic Factors on Exchange Rates .......... 5 Broad Strokes of the Expansion Plan: Financial Impacts of Exchange Rate Movements on a Corporation .................................................................................................................................. 5 Broad Strokes of the Expansion Plan: Main Risks and Main Benefits of the Proposed Expansion .................................................................................................................................... 6 Final Project Milestone Two (Module Five) ................................................................................... 7 Risk Mitigation Strategies: Current Financial and Strategic Impacts of International Risks ...... 7 Risk Mitigation Strategies: Mitigating Foreign Exchange Rate Risk and Justifying Tools ........ 7 Risk Mitigation Strategies: Analyze Financial Impacts of Foreign Exchange Risks to Inform Risk Mitigation Strategies ........................................................................................................... 7 Risk Mitigation Strategies: Future Mitigation Strategies Based on Prospective Market ............ 7 Final Project Milestone Three (Module Seven)............................................................................... 8 Global Expansion Financing: Capital Structure .......................................................................... 8 Global Expansion Financing: Funding ........................................................................................ 8 Global Expansion Financing: Financing ..................................................................................... 8 Final Project Submission (Module Nine) ........................................................................................ 9 Repatriation of Funds .................................................................................................................. 9 Executive Summary ..................................................................................................................... 9 References...................................................................................................................................... 10 Appendix........................................................................................................................................ 11 INT 620 Final Project 2 Note: Throughout this template, the items that are enclosed in angle brackets have been provided to guide your responses. In your submissions, please delete these items. Remember to update the title page and the footer. Final Project Milestone One (Module Three) Introduction: Company Proposal and Background Introduction: Subsidiary Expansion Broad Strokes of the Expansion Plan: Microeconomic and Macroeconomic Factors in Domestic Market Broad Strokes of the Expansion Plan: Microeconomic and Macroeconomic Factors in Prospective Global Market Macroeconomics Microeconomics Big picture: Macroeconomics is concerned Little picture: Microeconomics is concerned with how the overall economy works. The with how supply and demand interact in government is a major object of analysis in individual markets for goods and services. macroeconomics. The foundation of macroeconomics is Microeconomics consists of individual microeconomics, for example, how all entities, for example, whether price rises in markets interact to generate big phenomena the automobile or oil industries are driven by that economists call aggregate variables. supply or demand changes. Output and income (GDP), unemployment, Preference relations, supply and demand, inflation and deflation. opportunity cost. Used to determine an economy’s overall Used to determine methods of improvement health, standard of living, and needs for for individual business entities. improvement. Reference: http://www.imf.org/external/pubs/ft/fandd/basics/bigsmall.htm Broad Strokes of the Expansion Plan: Exchange Rate Regime in Domestic and Prospective Global Markets INT 620 Final Project 4 Broad Strokes of the Expansion Plan: Impacts of Economic Factors on Exchange Rates Broad Strokes of the Expansion Plan: Financial Impacts of Exchange Rate Movements on a Corporation INT 620 Final Project 5 Broad Strokes of the Expansion Plan: Main Risks and Main Benefits of the Proposed Expansion INT 620 Final Project 6 Final Project Milestone Two (Module Five) Risk Mitigation Strategies: Current Financial and Strategic Impacts of International Risks Risk Mitigation Strategies: Mitigating Foreign Exchange Rate Risk and Justifying Tools Risk Mitigation Strategies: Analyze Financial Impacts of Foreign Exchange Risks to Inform Risk Mitigation Strategies Risk Mitigation Strategies: Future Mitigation Strategies Based on Prospective Market INT 620 Final Project 7 Final Project Milestone Three (Module Seven) Global Expansion Financing: Capital Structure Global Expansion Financing: Funding Global Expansion Financing: Financing INT 620 Final Project 8 Final Project Submission (Module Nine) Repatriation of Funds Executive Summary INT 620 Final Project 9 References INT 620 Final Project 10 Appendix INT 620 Final Project 11
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Global Expansion Proposal

Home Depot Inc.
Kumyiah McDonald


Kumyiah McDonald

INT 620 Final Project

1

Contents
Final Project Milestone Two (Module Five) ................................................................................... 3
Risk Mitigation Strategies: Current Financial and Strategic Impacts of International Risks ...... 3
Risk Mitigation Strategies: Mitigating Foreign Exchange Rate Risk and Justifying Tools ........ 3
Risk Mitigation Strategies: Analyze Financial Impacts of Foreign Exchange Risks to Inform
Risk Mitigation Strategies ........................................................................................................... 4
Risk Mitigation Strategies: Future Mitigation Strategies Based on Prospective Market ............ 4
References........................................................................................................................................ 6
Appendix.......................................................................................................................................... 7

Kumyiah McDonald

INT 620 Final Project

2

Final Project Milestone Two (Module Five)
Risk Mitigation Strategies: Current Financial and Strategic Impacts of International Risks
Home Depot faces a number of risks in the international market. Just like in the United
States, the corporation international operations are affected by the respective country’s laws and
customs (Home Depot Inc., 2017. Other main operational risks that face Home Depot as a result
of international trading is the adverse tax consequences, difficulty in enforcing intellectual
property rights and corrupt local authority.
In addition to the operational risks, the corporation also faces translation risk. The
translation risk is caused by the fluctuations in exchange rates (Home Depot Inc., 2017). The
corporation’s international operations are done u...


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