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7/21/2019 MIB Managing Risk in International Business
1/20
Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
MANAGING RISK IN
INTERNATIONAL BUSINESS
!ehniques an+ Appliations!ehniques an+ Appliations
7/21/2019 MIB Managing Risk in International Business
2/20
Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
The Three Steps to Effective
International Risk
Manageent
+enti* the in+ivi+ual ris's+enti* the in+ivi+ual ris's Assess ris' ma.itu+es an+ e/posure levelsAssess ris' ma.itu+es an+ e/posure levels
norporate the ris' assessment in thenorporate the ris' assessment in the
+eision ma'in. proess+eision ma'in. proess
7/21/2019 MIB Managing Risk in International Business
3/20
Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
!olitical Risk
e*initione*inition
1oures1oures Assessment tehniquesAssessment tehniques
7/21/2019 MIB Managing Risk in International Business
4/20
Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
Mo"ern Tools of #inancial
$ecision Making
Require+ input"Require+ input"ARKE! A!AARKE! A!Aean-variane analsisean-variane analsis
Contin.ent laims analsisContin.ent laims analsiso+i.liani-illero+i.liani-iller
7/21/2019 MIB Managing Risk in International Business
5/20
Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
Shortcoings of Tra"itional
Techni%&es nsuite+ to mo+ern *inanialnsuite+ to mo+ern *inanial
+eision ma'in.+eision ma'in.
+ata+ata
parametersparameters
appliationsappliations
5enerall impreise an+5enerall impreise an+
+i**iult to appl+i**iult to appl
7/21/2019 MIB Managing Risk in International Business
6/20
Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
The Ne' #rae'ork
Overcoes These
Shortcoings ses mar'et +ata 6internationalses mar'et +ata 6international
pries7pries7
5enerates parameters ompati)le5enerates parameters ompati)le
8ith mo+ern port*olio an+ option8ith mo+ern port*olio an+ option
priin. theorpriin. theor
7/21/2019 MIB Managing Risk in International Business
7/20Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
Generating the $ata(
#o&r Steps
Esta)lish aountin. +isiplineEsta)lish aountin. +isipline
e*ine inome *lo8se*ine inome *lo8s
e*ine e/pen+iture *lo8se*ine e/pen+iture *lo8s
Lin' inome an+ e/pen+iture to the )alaneLin' inome an+ e/pen+iture to the )alane
sheetsheet
7/21/2019 MIB Managing Risk in International Business
8/20Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
Iportant Ne' $ecision
Making !araeters
aroeonomi pro*itsaroeonomi pro*its
ar'et value o* the eonomar'et value o* the eonom
!he eonoms rate o* return!he eonoms rate o* return
!he eonoms *inanial ris' premium!he eonoms *inanial ris' premium
!he eonoms sstemati ris' 6)eta7!he eonoms sstemati ris' 6)eta7
7/21/2019 MIB Managing Risk in International Business
9/20Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
Assessing )o&ntr* Specific
#inancial Risk
Estimate stan+ar+ +eviation o* ountr rateEstimate stan+ar+ +eviation o* ountr rate
o* returno* return Estimate total amount o* *orei.n +e)t an+Estimate total amount o* *orei.n +e)t an+
its +urationits +uration
Appl the in*ormation in the :la'-1holesAppl the in*ormation in the :la'-1holesoption priin. *ormulaoption priin. *ormula
7/21/2019 MIB Managing Risk in International Business
10/20Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
Ne' !araeters( E+aples
!he *inanial ris' premium!he *inanial ris' premium
nsolven or illiqui+itnsolven or illiqui+it
!he ma/imum +e)t level!he ma/imum +e)t level
mplie+ volatilitmplie+ volatilit
7/21/2019 MIB Managing Risk in International Business
11/20Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
A Big ,&estion
;E1 !
7/21/2019 MIB Managing Risk in International Business
12/20Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
)LARK vs -
EUROMONE.
The #orecast /011
!he Clar' *oreast"!he Clar' *oreast"EuromoneyEuromoney, 1eptem)er, 1eptem)er
#9>>, pa.e 234#9>>, pa.e 234?0 ountries?0 ountries
!he ER;;@E *oreast"!he ER;;@E *oreast"EuromoneyEuromoney,,
1eptem)er #9>>, pa.e 23%1eptem)er #9>>, pa.e 23%##$ ountries##$ ountries
7/21/2019 MIB Managing Risk in International Business
13/20Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
)LARK vs- EUROMONE.
The Res< /002
0
0,2
0,4
0,6
0,8
1
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57
Exhibit 6.9 - Percent of Unreschedued !ebt "t E"ch
#"n$
%"r$
Euro&one'
7/21/2019 MIB Managing Risk in International Business
14/20Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
Estiating S*steatic Risk
Construt the
7/21/2019 MIB Managing Risk in International Business
15/20
Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
!erforance Meas&reent
@!ER@A!;@AL@!ER@A!;@AL
P;R!F;L;1P;R!F;L;1
7/21/2019 MIB Managing Risk in International Business
16/20
Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
Mone* Market !ortfolios
/0134/00/Optimized GDP weights Equal weights Jap-Ger-Switz
Arithmetic.
mean
#3B #2B ##&>B ##&0B
Geometric
mean
#2&$B ##&2B ##B 9&9B
Standard
deviation
$&%B #3&3B #2&4B #%&$B
Return/SD #&$33B 0&902B 0&9%2 0&$0#B
7/21/2019 MIB Managing Risk in International Business
17/20
Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
Long Ter Governent Bon"
!ortfolios
/0134/00/Optimized GDP weights Equal weights Jap-Ger-Switz
Arithmeticmean
#4B #2&4B #2&%B ##&>B
Geometric
mean
#3&%B ##&?B ##&>B #0&>B
Standard
deviation
##B #3&2B #3&2B #%&$B
Return/SD #&2$3B 0&939B 0&9%0B 0&$%3B
7/21/2019 MIB Managing Risk in International Business
18/20
Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
E%&it* !ortfolios
/0134/00/Optimized Equal weights
with US
Equal weights
without US
Jap-Ger-Switz
Arithmetic
mean
20#B #%&>9B #?&$$B #$&4%B
Geometric
mean
#$&44B #4&2B #4&>3B #4&92B
Standard
deviation
2%&%?B 20&?4B 22&0>B 2%&>%B
Return/SD 0&$>?>B 0&$?&99B 0&$%9?B 0&?$%0B
7/21/2019 MIB Managing Risk in International Business
19/20
Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r
E+cess Ret&rn to Risk for
Selecte" !ortfolios
/0134/00/Optimized Equal Weights Jap-Ger-Switz
Money market 0&$00 0&33# 0&2#0
LT govt. bond 0&%?$ 0&3?4 0&2?#
Equity index 0&4>4 0&409 0&3$%
1oure" E& Clar', A .eneral nternational mar'et in+e/D, International Journal o !inan"e,
vol& 3, 6#99%7 #2>>-#3#2
7/21/2019 MIB Managing Risk in International Business
20/20
Ephraim CLARK 43 rue Louis Rouquier 92300 Levallois-Perret Frane !el" 33-#-4$-%$-$2-34 elar'(lu)-internet *rEphraim CLARK 43 rue Louis Rouquier 92300 Levallois-Perret Frane !el" 33-#-4$-%$-$2-34 elar'(lu)-internet *r
O&tline
:rie* revie8 o* tra+itional international ris':rie* revie8 o* tra+itional international ris'
analsisanalsis
Presentation o* ne8 tehniquesPresentation o* ne8 tehniques
AppliationsAppliations
+iret investment+iret investment
port*olio investmentport*olio investment
ross )or+er loansross )or+er loans