Risk Management in International Business

Aims of the course

- To develop students’ ability to identify, assess and manage the risks that are inherent in international business transactions.
- To reinforce students’ capacities of strategic analysis and application in an international context.
- To develop students’ general research ability and their practical skills needed for argumentation, discussion, presentation and negotiation.

Course syllabus

1. The nature of risk: expected return and standard deviation, mean-variance analysis, diversification and risk, The capital asset pricing model
2. Defining risk in international business
- Specifics of international business environment
- Country-specific risk: economic, financial, currency and socio-political risk
3. Assessing economic and financial risk
- Economic and financial risk: variables and ratios for risk assessment, Income and balance of payment identities for an open economy
- Some warning benchmarks for risk management
- Case studies
4. Political risk analysis
- Methods and techniques: comparative, analytical, econometric techniques
- Applications: Measuring exposure to political risk in direct investment
5. Managing political, economic and financial risk
- Covering commercial exposure: internal and external hedging techniques
- Managing exposure of FDI: internal and external hedging techniques
6. Evaluating currency (foreign exchange) risk
- Foreign exchange markets and exchange rate regimes
- Foreign exchange markets, types of ER
- Exchange rate regimes, comparative review of past and present ER regimes
- The international role and volatility of euro
- Currency risk: evaluating transaction, economic and translation exposure.
7. Managing exposure to currency and interest rates risks
- Internal techniques of exposure management
- Managing exposure to currency and interest rates risks by using financial derivatives (exposure to currency and interest rates risks, financial derivatives:, Forward contracts, Swaps, Financial futures, Currency options). Examples and applications.
8. Risk management in practice
- Traditional versus integrated approach (ERM)
- Integrating political risk into ERM
- A case of ERM in a Slovenian subsidiary of MNC.

Course director(s)

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