Systematic and Unsystematic Risks Essay Example | Topics and Well Written Essays - 1250 words

Systematic and Un organized Risks - Essay ExampleThis makes multi-national corporations safer compared to their domestic counterparts. Normally, carcassatic endangerment assessment are important for listed companies to legally price the equities, de end pointining the cost of with child(p) and effective evaluation of projects. However, internationalization also poses some distinct authoritative risks to multi-national corporations. Some of these distinct risks are - picture to currency fluctuations in bigeminal countries, exposure to political risks pertaining to multiple governments, exposure to reduction in cleverness of monitoring takers in multiple countries, increased chances of asymmetric & inaccurate localized information thus resulting in wrong investment decisions, etc. Internationalizing investment portfolios also increases the exposure to unsystematic risks - like competitor military action in a foreign country, managers foul play in another country where the com panys monitoring system is weak, etc. Hence, it is important for the organization to have sound global knowledge base & threat database for risk management.Organization structures with distri besidesed force out often increases the exposure to both systematic and non-systematic risks. This is the reason that Chatterjee and Lubatkin et al (1992. pp155) felt that steep mergers reduces the exposure to both systematic and non-systematic risks. They also observed that vertically integrated companies are able to manage lower cost of capitals thus enabling the integrated company to participate in a wider make up of opportunities. Hence, multi-national companies with centralized corporate governance and risk management possess lesser exposure to both systematic and unsystematic risks compared to companies having distributed (country specific) risk management & power structures.Cornell (1999. pp198-199) presented a correlation between risk duration and capital budgeting stating that long term projects may be having higher risks if the variations in cash flow is stochastic in nature. Such projects make estimations of discounted cash flow quite difficult and hence the author recommended discounting of long term projects at higher rates. This is the reason that investors normally prefer to invest in short term projects guaranteeing riotous returns. Discussions on Risk Management in DeloitteThe above analysis of risk exposures of multi-national corporations has been carried out to build analogy with Deloitte in which the author works as partner in Croatia. Deloitte is the largest and oldest multi-national corporation in risk consultive and audit services. Deloitte operates in multiple countries across the world through a tightly controlled Franchisee model in which local entrepreneurs are allowed to manage local business based on local market strategies but the risk management, code of conduct and operating methodology is largely governed globally by centralized powe r centers. The organization possesses a global knowledge base for risk management and allows diversification of portfolios in multiple coun