Indicative Content. Assessment Criteria The learner can:

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1 Unit Title: International Business Finance and Planning Unit Reference Number: R/601/3638 Guided Learning Hours: 210 Level: Level 6 Number of Credits: 25 Unit purpose and aim(s): This unit aims to give learners a critical understanding of: business environmental analysis in the international business and financial planning process international financial markets and the international financial environment international investment projects and project finance the impact of globalisation on the business and financial planning process the management of financial risks associated with global expansion and sustainability Learning Outcome 1 The learner will: Understand the importance of internal and external business environmental analysis in the international business and financial planning process. 1.1 Describe and analyse the importance of international markets to organisations and their associated political risks Explain the role of multinationals within the international business and financial environment, their objectives, their constraints (environmental, regulatory and ethical) and the benefits to be gained (economies of scale, sources of lower production costs, increased market share, risk reduction through diversification, experience and new skills) Outline the benefits of the multinational financial system including tax arbitrage, financial market arbitrage and regulatory system arbitrage Explain the types of political risk (operational restrictions, discriminatory practices, loss of assets) and distinguish between the economic issues and business issues involved in political risk (confiscation, expropriation, nationalisation, trade related disputes, government interference, corruption, labour problems) Explain the strategic implications of political risk and demonstrate an awareness of suitable models for quantifying political risk for planning purposes (e.g. Stobaugh s analysis and HWM Political System Stability Index). 1.2 Explain and use basic economic indicators in the preparation of international forecasts and plans Explain inflation, national income, interest rates, exchange rates, balance of payments and government currency/economic controls and discuss their consequences for a business Discuss the inter-related nature of economic indicators Use economic indicators in preparing forecasts and plans.

2 1.3 Evaluate the financial implications of environmental regulations and statutory requirements imposed on organisations Identify and evaluate the potential impact of national and international environmental regulations and key statutory requirements (including health and safety, sale of goods acts and employment legislation) on financial planning considering the differing standards of different countries Identify and evaluate the implications of statutory and ethical requirements to report on environmental and compliance issues relevant to an individual organisation. Learning Outcome 2 The learner will: Understand the main features of the international financial markets and the international financial environment. 2.1 Describe and evaluate international financial markets and alternative sources of finance Explain the characteristics of the foreign exchange market, including the role of arbitrage in the foreign exchange market and spot and forward exchange rates Evaluate alternative sources of long, medium and shortterm finance Outline the features of the Euromarkets, Eurodollar deposits and loans and the international bond market. 2.2 Assess the planning, monitoring and managing of short term assets and liquidity in an international context Explain the features of international trade financing e.g. accounts receivable financing, cross border factoring, letters of credit, acceptances etc Describe and explain international issues in cash management, in particular reasons for holding cash, cash pooling/netting, interest rate influences, and managing blocked funds Explain different criteria for obtaining short term funds and the influences of foreign currency stability. 2.3 Describe the features of international trade and minimising credit risk Explain the methods of payment used to settle international transactions i.e. prepayments, bills of exchange, letters of credit, open accounts Describe and evaluate alternative agencies that facilitate international trade such as bank insurance, export credit guarantees, export funding.

3 Learning Outcome 3 The learner will: Know how to assess international investment projects and associated project finance options. 3.1 Describe and evaluate the sequential stages of corporate internationalisation Describe the different forms of direct foreign investment from exporting, licencing, distributing, overseas branches, acquisitions to becoming a multinational company Explain the double-edged nature of globalisation in terms of simultaneous benefits and problems Use risk analysis to calculate the effects of potential changes as a result of the effects of globalisation. 3.2 Explain the considerations involved in international investment and appraise the opportunities Describe and explain the main factors affecting capital budgeting (in a foreign country) of a MNC, including exchange rate fluctuations, inflation, host government incentives and financing Explain and describe how corporate and foreign country characteristics influence a MNC s cost of capital and why there are differences in the cost of capital in different countries Evaluate an investment opportunity in a foreign currency using the home country currency approach. 3.3 Describe the characteristics and features of project finance Explain the characteristics and significance of a project finance loan (one for a separate legal entity to operate the project) Identify and explain the advantages of funding major international investments using project finance Consider alternative risk sharing options to project finance deals. Learning Outcome 4 The learner will: Understand the impact and consequences of globalisation on the business and financial planning process.

4 4.1 Evaluate and plan for the potential opportunities and threats to an organisation arising from globalisation Explain the double-edged nature of globalisations in terms of simultaneous benefits and problems Use risk analysis to calculate the effects of potential changes as a result of the effects of globalisation Explain the use of information systems and databases to provide early warnings and alerts. 4.2 Assess a financial appraisal of overseas market opportunities Explain the role of demand analysis, industry analysis and competitive analysis in assessing overseas marketing opportunities Evaluate the potential costs and profitability of markets under investigation from given figures. 4.3 Evaluate and discuss the influence of foreign government fiscal and monetary policies on overseas expansion and the consequences of currency fluctuations on consolidated accounts Calculate and explain the effects of economic and transaction exposure on company profitability Suggest and explain methods of protecting against the effects of economic and transaction exposure including hedging, insurance, strategic and operational planning Explain the nature and significance of translation exposure and identify and discuss simple procedures for reducing the impact of this exposure, including adjustment of funds flow, use of financial instruments and exposure netting. Learning Outcome 5 The learner will: Understand the importance of the management of financial risks associated with global expansion and sustainability. 5.1 Explain the need for an international tax strategy and demonstrate a basic understanding of the operation of corporate income taxes and withholding taxes Explain the basic benefits of a global tax strategy Demonstrate a basic understanding of the operation of corporate income taxes and withholding taxes Explain the basic principles underlying simple tax reduction strategies. 5.2 Explain and discuss the uses and abuses of Explain the nature of intercompany transfers.

5 transfer pricing Discuss the benefits of a sensible intercompany transfer system including tax reduction, funds positioning, exchange rate exposure management, circumvention of exchange controls, reduction of import tariffs, overcoming other import restrictions and enabling cash transfers Explain the basic legal and ethical aspects of transfer pricing. 5.3 Explain and utilise techniques for dealing with global exchange rate risk and global interest rate exposure Distinguish between internal and external hedging techniques and between transaction exposure, translation exposure and economic exposure Explain and demonstrate the application of different internal and external methods of hedging transaction risk Explain the difficulties in choosing between fixed and floating rates of interest and explain the interest yield curve and its role in interest rate exposure management Evaluate an organisation s potential exchange rate risk, using scenario analysis and describe the products available for exchange rate risk management. Assessment: Assessment method: written examination (unless otherwise stated). Written examinations are of three hours duration. All learning outcomes will be assessed. Recommended Reading: Please refer to the Tuition Resources section of the Members Area of the ABE website ( for the recommended reading for this subject.