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Risk Management in International Business

course

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. Establishing the context and defining risks in international business
• Specifics of international business environment, formal and informal institutions
• Development of the concept of country-specific risk and its components: economic, financial, currency, political, social risk, environmental risk, cross-cultural risk
2. The nature and measures of risk:
• Expected return and standard deviation, mean-variance analysis
• Value at Risk (VaR) and Maximum Probable Annual Loss (MPAL)
• Diversification and risk
• Capital asset pricing model, limitations of mean-variance framework and its alternatives (Arbitrage pricing models, Multi-factor models, Proxy models)
3. Economic and financial risk assessment
• variables and ratios for economic and financial risk assessment, macroeconomic analysis of income and balance of payment developments
• 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 (macro and micro assessment, integration of risk estimates in the NPV concept)
5. Managing political, economic and financial risk
• Covering commercial exposure: internal and external hedging techniques
• Managing exposure of FDI: internal and external hedging techniques, political risk insurance
• Risk response strategies.
• A case study on political risk management
6. Evaluating currency (foreign exchange) risk
• Foreign exchange markets and exchange rate regimes
• The international role and volatility of euro
• Currency risk evaluation: 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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  • Office Hours
  • Thursday at 14:45 in R-306
 
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