Financial management is one of the most important aspects of business these days as the success of a business undertaking is largely dependent on proper management of its finances. As the corporate world has opened up these days, the factor of international financial management has come into play, with businesses trading in foreign currencies. The main purpose of international financial management is to ensure that the business is able to connect with its partners, including clients, lenders and suppliers, who are located overseas.
In addition to dealing in different currencies, it also includes looking into some key aspects such as market imperfections, difference in political scenarios and diverse opportunities for businesses located in various countries around the world. Primarily, international finance management became an integral part of business, both on domestic as well as global scales, when liberalization and technological advancement became a part of the business environment in the current scenario. As international trade experienced phenomenal growth on a global scale, the trade between countries opened up and exporters and importers started participating in international transactions. This led to the need of looking into the management of international finance.
Significance of International Financial Management
The increasing trend of globalization of economies has opened up international trade and increased the importance of international financial management for business organizations. In comparison to the domestic markets, the trends in the international market are significantly different and it is international financial management, which actually helps to study these trends. This has a positive effect on the working efficiency of the business and plays a vital role in making it a successful one and helping it make higher profits. In fact, in the current competitive market scenario in the liberalized economic structure, it has become practically impossible for businesses to sustain themselves without international financial management.
Compared to national financial markets international markets have a different shape and analytics. Proper management of international finances can help the organization in achieving same efficiency and effectiveness in all markets, hence without IFM sustaining in the market can be difficult.
Companies are motivated to invest capital in abroad for the following reasons
- Efficiently produce products in foreign markets than that domestically
- Obtain the essential raw materials needed for production
- Broaden markets and diversify
- Earn higher returns
- foreign investment
International Finance has become an important wing for all big MNCs. Without the expertise in International Financial Management, it can be difficult to sustain in the market because international financial markets have a total different shape and analytics compared to the domestic financial markets. A sound management of international finances can help an organization achieve same efficiency and effectiveness in all markets.