Role of an International Financial Manager (2)

8/9/2019 Role of an International Financial Manager (2)

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Fore casting the financial environment- prices, inflation rates, interest

rate and exchange rate.

Management of asset- from cash management to international capital

budgeting, at home and abroad, in domestic and foreign currencies.

Management of liabilities- borrowing relationships and decisions, in

domestic and foreign currencies and markets, short term and long term.

Exchange risk management- measuring the effect of exchange rate

changes on balance sheets, income and cash flows, managing these

risks.

Performance evaluation and control- accounting for outsiders, the tax

authorities, and for management, and doing so across countries and

currencies without distortion.


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Transparency

The goal is to make timely, reliable data, plus information about

economic and financial policies, practices, and decision-making,

readily available to financial markets and the public.

Developing and Assessing Internationally Accepted Standards

Adherence to international standards and codes of good

practices helps ensure that economies function properly at the

national level, which is a key prerequisite for a well-functioning

international system.

Financial Sector Strengthening


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Banks and other financial institutions need to improve internal

practices, including risk assessment and management, and the

official sector needs to upgrade supervision and regulation of

the financial sector to keep pace with the modern global

economy.

Involving the Private Sector

Better involvement of the private sector in crisis prevention and

resolution can limit moral hazard, strengthen market discipline

by fostering better risk assessment, and improve the prospects

for both debtors and creditors.

Modifying IMF Financial Facilities and Other Systemic Issues


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1. Transparency

2. Developing and Assessing Internationally

Accepted Standards

3. Financial Sector Strengthening

4. Involving the Private Sector


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Individuals

Corporations

GovernmentsFinancial intermediaries

Brokers


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Gold and Gold Bullion Standard

The first modern international monetary system was the gold

standard

Operating during the late 19th and early 20th cents.

The gold standard provided for the free circulation between

nations of gold coins of standard specification.

Gold was the only standard of value.

During the 1920s the gold standard was replaced by the gold

bullion standard


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In the decades following World War II, international trade was

conducted according to the gold Exchange standard.

Nations fix the value of their currencies not with respect to gold,

but to some foreign currency, which is in turn fixed to and

redeemable in gold

At the Bretton Woods international conference in 1944, a system

of fixed exchange rates was adopted & International Monetary

Fund came into picture


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Modified version of Gold Standard adopted by US

The US treasury would buy and sell gold for foreign

currency only to another government agency

Export and import of gold was prohibited

the gold price was fixed at $35 an ounce, and the US

government guaranteed that it would control the price

at this level


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After the collapse of the Bretton Woods Agreements,

the world observed a period of high risk in financial

markets. High government deficits, high inflation and

the OPEC oil embarg0o increased financial price

volatility.

In this system the gold standard became

Obsolete and the values of various currencies

were to be determined by the market.


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During the 1930s, many of the worlds major economies had unstable

currency exchange rates.

Many nations used restrictive trade policies.

In the early 1940s, the United States and Great Britain developed

proposals for the creation of new international financial institutionsthat would stabilize exchange rates and boost international trade.

In the first three weeks of July 1944, delegates from 45 nations

gathered at the United Nations Monetary and Financial Conference in

Bretton Woods, New Hampshire.

Delegates met to discuss the postwar recovery of Europe as well as anumber of monetary issues, such as unstable exchange rates and

protectionist trade policies.


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There was also a recognized need to organize arecovery of Europe in the hopes of avoiding the

problems that arose after the First World War.

The delegates at Bretton Woods reached an

agreement known as the Bretton Woods

Agreement to establish a postwar international

monetary system of convertible currencies, fixed

exchange rates and free trade and subsequently

led to establishment of IMF.


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Agreement came into force on December 27, 1945

The organization came into existence in May 1946(29

countries signed the article of agreement)

Established to promote the health of the world

economy.

Headquartered in Washington, D.C

184 member countries


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Primary purposes

Promote international monetary cooperation

Facilitate the expansion and balanced growth of international

trade

Promote exchange stability and maintain orderly exchange

arrangements among members.

International Monetary Fund (IMF) is an international organization

that provides financial assistance and advice to its member

countries and it helps to-

Working to foster global monetary cooperation,

Secure financial stability

Facilitate international trade

Promote high employment and sustainable economic growth

Reduce poverty

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Role of an International Financial Manager (2)