Envisage risks, manage risks

Investing abroad means investing into a totally new environment with a series of uncertainties arising from the political and financial systems of the target country. It also means a way to diversify risks through the geographical spread of markets, suppliers, currencies, interest rates, etc. Geographic diversification is a common strategy used by many multinational enterprises nowadays.

Nevertheless, one must adjust the expected return according to the expected risks.

Political risks such as expropriation, blockage of funds (freedom on capital flow in and out of the target country) are inherently qualitative in character. Anticipation and operation strategies such as control of technology, control of markets, local debt and multi-source borrowing are some of the tools for the management of political risk.

Foreign exchange risk is a crucial issue – that includes transaction exposure, operating exposure and accounting exposure – because it affects directly the firm’s profitability, net cash flow and consequently its market value. A firm’s future cash flows can be secured by hedging against, for example, exchange rates, interest rates and commodity prices. However the required financial instruments are often not available in the emerging economies whose financial markets are still at the fledgling stage.

In many emerging economies, the legal and financial systems are still developing and the regulations governing business are unclear and complex. For effective risk assessment in these economies you need an experienced partner with local knowledge in these areas. Sage International Consultancy offers professional risk management combined with the necessary experience and knowledge of local practices. After evaluating and assessing the potential impact of the risk, Sage develops customized strategies that ensure an optimal return on the risk involved.


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Risk Management