Is it true that international finance is increasingly becoming an important part of the financial management of firms?

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Michael Ugulini | (Level 3) Educator

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This is a true statement that international finance is increasingly becoming an important part of the financial management of firms. In today’s ultra-competitive business environment companies are increasingly operating in, and/or sourcing capital, raw materials, inventory, and talent from other countries.

Consequently, firms today must research and understand international finance as applies to their business. This may involve knowing the international going rate for financial compensation for employees they bring into their enterprise from other countries. It may involve keeping abreast of the monetary exchange rates of different countries in which they operate, or from where they buy raw materials or finished goods.

Moreover, a business must research and understand the international rules as applies to securing capital from foreign markets. They must understand the wants and needs of international investors. They must also understand the listing requirements for their company (if they’re publicly-traded) on the different stock market exchanges.

Additionally, a company will want to understand the financial reporting requirements they must adhere to in different countries where they may have operations. Furthermore, they may involve themselves in foreign exchange hedging, and forward contracts on international markets. Therefore, they must understand the requirements and complexities of engaging in these types of transactions outside of their own national boundaries.

These are just a few examples of the need for a company to have a thorough understanding of international finance as part of their overall financial strategy for their enterprise.

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