International finance management is the art of managing foreign currency when two or more countries trade. It’s main focus is to maximize investors wealth while protecting their trading interests. Increase in international trade between countries has great impact on the growth of international financial management. This is due to the need of managing investors fund in the international business. Efinancemanagement explains that international finance management has been made possible by nations opening their markets to international players.
Issues of interest in international finance management
Foreign exchange risk
International market is prone to foreign exchange risks originating from fluctuating exchange rates. Foreign currency fluctuations can lead to a massive loss during a trade. Thus it is important for international traders to take precautionary steps when trading in order to avoid loss that can arise as a result of currency fluctuations.
Changes in political environment and instabilities pose a great threat to international investors. Politics is an important issue of concern in international finance management due to effect on; peace, trading policies and taxation rules among other reasons.
International market imperfections
Unlike a local perfect competition market, there is a huge information gap in the international market. Information gap arises due to distance and time difference between production and consumption of commodities.
Investors venture into the international market due to the following main reasons:
- To fill in product gaps that exists in a foreign market
- Gain advantage of low production costs in foreign country
- To utilize abundant resources and raw materials in the foreign country.
Functions of international finance manager
International finance manager is charged with the role of obtaining funds at the lowest cost of capital. This involves analyzing different source of funds available both locally and internationally and securing a competitive deal.
The international financial manager is also in charge of investing shareholders’ investment in opportunities that best maximizes shareholders wealth. Thus he/ she is in charge of evaluating different investment alternatives for the benefit of shareholder.