International Market Expansion Essay Example | Topics and Well Written Essays - 1500 words - 2

International Market Expansion - Essay exercisingper prevailing accounting standards, all firms must translate their foreign property pictorial matters in local property in order to represent them on their balance canvas tents. This exposure normally arises when a parent corporation needs to convert the liabilities/assets of its subsidiary in its balance sheet. The risk arising as a result of this adaptation is termed as translation exposure. (Wang, 2009)It really measures the sensitivity when the assets or liabilities of Citibank are actually liquidated due to fluctuations in currency exchange rate. Transaction risk and exposure arises when they are liquidated and hence may gain or put up value in the process of conversion. It is critical to note that effect exposure do not bring in any impact on the cash flows of the firm whereas transaction exposure does have an impact on the cash flows of the firm. International firms therefore have to consider this aspect into account similarly.Translation exposure much arises due to recording of items on the balance sheet therefore Citibank can engage into standards balance sheet hedge in order to safeguard themselves against any changes in the values. Transaction exposure can also be managed by entering into foreign exchange derivatives. Citibank can actually manage its transaction exposure by entering into forward and future exchange rates with counterparties. Foreign currency swaps as swell as other more sophisticated instruments may also be used to manage transaction risk. More specifically, Citibank however, need to define risk limits against each currency besides forming policy regarding counterparties. This will actually allow Citi Group to manage counterparty risk associated with the parties with whom it actually enters into foreign currency transactions. (Riad A. Ajami & Goddard, 2006)1. International banks tend to hurry international trade and to ensure the movement of goods and services across po litical borders. International banks though not deal in goods but provide