International-5.5

A regional bank has decided to open an office overseas for serving those businesses that are expanding internationally. Choose a country with a large financial center that you believe would be helpful to your customer base.

• Discuss some of the challenges you may face in this new environment.
  • What are the cultural, ethnic, social, and educational characteristics?
• Describe the political and legal systems.
• How much does the government intervene in the private sector?
  • How will that affect your financial institution?
• What type of economic system does it have?
  • What is the history of that economic system?
• How is the country involved in international trade?
  • How does the government get involved in trade issues?
  • Will that help or hurt your financial institution?
• Will your presence in this country be helpful in your attempts to invest in other developing countries?
• Is this country involved in any regional integration efforts? How so?
• Why did you choose this location for your bank?
• As a manager, what would be your overall assessment about whether you want to pursue opening an office there?
  • Are the financial risks worth taking?
  • Will it be beneficial to all of the stakeholders?

In pursuing this, what type of presence do you think would be best suited to your objectives?

• How should the plant be financed?
• Should they hedge foreign exchange or something else? Explain.
• Identify 3 foreign exchange instruments you would recommend?
• What, if any, government regulations that would affect earnings and cash flow should they be aware of?
• Include the need to be aware of inflation and interest rates and how it affects exchange rates.
• Keep in mind that the country that the plant is in does not necessarily have to be where the financing is done.