Beginning a business in an overseas country can pose challenges to foreign business persons or corporation that wishes to expand their businesses. Problems and challenges often face businesses that are starting-up. The international finance picture in the United States is quite complicated and unique. The paper compares some of the unique aspects of the finance issues of the United States with the international finance challenges. It also captures the possible recommendations that business firm can undertake to minimize the impacts of risks involved in international ventures.
Comparison between National Finance and International Finance
The U.S is among nations that faces hurdles in the credit markets since the 2007 financial crisis (Doyran, 2011). All the credit markets including businesses have been tightened-up. The lender closely reexamines the finances of the corporation before approving loans. It may pose a challenge to a new business corporation. The corporation must have a clean credit history to qualify for a loan. In the US, businesses must have sufficient assets and satisfactory business plan in order to qualify for loaning. The financial picture of the United States is also characterized by high costs of energy. The high costs are not similar to the cost of energy across the world.
As opposed to the challenges faced in the U.S system of finance, international finance is characterized by more complicated challenges and risks. Doing business in a foreign country other than the United States can pose the risk associated with foreign exchange fluctuations. It is a risk that is of an international nature because it is the international businesses that face it. The international finance system is also faced with the challenge of the looming political risk that is not witnessed in the national financial systems. The impact of the challenge is widely felt by international businesses because they interact with different foreign governments in the course of their operations. Another risk that is present in the international set-up is the risk posed by varying market imperfections. The imperfection of the international finance system causes hindrances to the free flow of capital including finances across the borders of different nations.
The national financial picture of the US could be complicated but dealing with the internal challenges can be easier because the system is well known to an established business administration in the US. The risks posed by international finance in other countries can be handled through the following recommendations: An investing firm can locate production in any region to raise funds in any capital market in the world where the cost of capital is lower. The firm should consider investing in a foreign country that exhibits a relatively peaceful political atmosphere. A warring economy shuns of investors and leads to the devaluation of the respective currencies of the affected nation. The firm should not invest in any nation that has punitive laws of capital migration or movements. Such economies are likely to hinder the flow of finances. The firm should obtain an international finance risk insurance cover to enable compensation in case the business incurs financial losses (Grath, 2008).
Starting a business in the other countries possess varied challenges that have negative implications on the financial aspects of the business. Embracing the recommendations effectively may help in edging against any unique international financial risks posed to the business in the foreign economy.
Doyran, M. A. (2011). Financial crisis management and the pursuit of power American pre-eminence and the credit crunch. Burlington, VT: Ashgate.
Grath, A. (2008). The handbook of international trade and finance the complete guide to risk management, international payments and currency management, bonds and guarantees, credit insurance and trade finance. London: Kogan Page.