International Financial Management Overview

Financial management in an international business environment, differing from domestic finance due to currency variations, political situations, market imperfections, and diverse opportunities.

The framework for international payments, capital movements, and currency exchange rate determination, involving agreements, rules, institutions, mechanisms, and policies.

Exchange rates that are kept at a specific value by governments or other organizations.

Exchange rates that fluctuate based on market supply and demand.

A system where both gold and silver are used as money.

The process of change in the international monetary system throughout history.

The absence of major disruptions in the global financial system.

A monetary system where both gold and silver circulate as legal tender, with exchange rates based on metal content.

Strategies that are developed to operate in various countries and various environments.

When two types of money are legal tender, the less valuable one will circulate more and the more valuable one is hoarded.

An international monetary system where gold is the sole basis for currencies, with free exchange between gold and currency.

Criteria for an effective gold standard: (1) only gold can be coined; (2) two-way gold-currency exchange at a set ratio; and (3) gold can be freely imported/exported.

Exchange rates are determined by the gold content of the currencies.

Under the gold standard, imbalances in exchange rates are naturally corrected by gold flows.

International payment imbalances are automatically corrected by gold flows under a gold standard.

The classical gold standard lasted about 40 years (around 1875-1914).

A monetary system where a country commits to exchanging its currency for a foreign currency at a fixed rate, and the issuing authority is restricted to ensure this.

A country fixes its currency to another currency or a basket of currencies, intervening directly or indirectly to maintain the fixed rate.

An exchange rate that remains within a narrow margin for at least 6 months, not floating.

A country's exchange rate that is officially fixed but adjusted gradually.

The ability of a country's monetary authority to influence its domestic money supply and interest rates.

A foreign currency or a basket of currencies to which a country's exchange rate is pegged.

Actions taken by a country's monetary authority to influence the exchange rate.

A statement summarizing all transactions between a country's residents and the rest of the world over a specific period. It shows all payments and receipts.

Part of the BOP, recording trade in goods and services, plus income and transfers.

Net exports and imports of physical goods; part of the Current Account.

The difference between exports and imports of visible goods.

Section of the BOP showing investment flows and changes in reserves.

Assets held by a central bank to manage exchange rates and balance the BOP.

When imports of goods and services are greater than exports.

When more money is flowing into a country for investment than flowing out.

The recognition that shareholders play a crucial role in a company's success and have a right to participate in its governance.

A group of individuals elected by shareholders to oversee a company's management and act in the best interests of shareholders.

The board's primary responsibility is to prioritize the interests of shareholders above all else.

The practice of open and honest communication with stakeholders about a company's operations, finances, and ethical conduct.

Transparency builds trust with stakeholders, encourages engagement, and potentially attracts more investors.

Protecting sensitive information and ensuring the security of a company's systems, data, and operations.

A data breach can damage a company's reputation, erode trust, lose investors, and impact its financial performance.

A system where each stakeholder group (shareholders, board, management, employees) is responsible to the others, ensuring transparency and ethical decision-making.

A set of rules, practices, and principles that guide a company's operations to ensure accountability, transparency, and ethical behavior.

The practice of openly sharing information about a company's financial performance and operations with stakeholders, like shareholders and the public.

A notorious example of poor corporate governance where executives used deceitful accounting practices to hide financial problems, ultimately leading to the company's collapse.

The legal and ethical obligations of financial institution leaders to act in the best interests of their stakeholders, including depositors and investors.

A critical aspect of governance in financial institutions, emphasizing clear communication of financial health and risk assessments to build public confidence.

Special considerations within financial institutions due to their role in protecting the public's trust and depositors, requiring transparency and responsible risk management.

Sudden and unexpected changes in the availability of funds within a financial institution, potentially leading to instability and risk.

How good governance practices contribute to the effectiveness of regulatory oversight in financial institutions, ensuring their stability and safeguarding the public's interest.