Risky Business

Paper Summary:

Conducting business internationally can be profitable, but also very risky. Inherent in any business transaction are financial risks. Those risks are amplified when business is conducted overseas or across wide borders. Several factors influence financial risk, including the economic viability of the country one is conducting business in, the political climate of both countries, and the potential for foreign exchange guarantee issues. This paper explores these risks and factors.

From the Paper:

"Conducting business internationally will require foreign exchange trading. In a typically international business environment, it is difficult to ensure that both parties will deliver the currency needed to settle a business transaction (Kodres, 2003). Those participating in the international foreign exchange market are typically "scattered across the globe" with a majority of financial exchange transactions occurring in countries such as London, New York and Tokyo (Kodres, 2003). Many international transactions involve non-financial customers, which in and of itself may propose a security danger (Kodres, 2003). The structure of the foreign exchange market is typically very liquid, meaning that transaction are large and executed frequently (Kodres, 2003). Prices on foreign exchanges change very rapidly. These exchanges typically occur at all hours of the day and night (Kodres, 2003). They occur in many different banking institutions with differing national jurisdictions which also poses a risk (Kodres, 2003)."

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