Global Interaction

Respond to the following in a minimum of 175 words. Remember to in-text cite and then reference materials where required. As a note, most of the initial response questions require demonstrated research.

Discuss the Following in a Single Initial Reply:

1) Organizations do not operate in a vacuum and are subject to governmental regulation. This is particularly true with publicly traded organizations. Based on business here in the United States – who can name a few regulatory bodies that directly relate to financial management?

2) What exactly is risk aversion and can it relate to cultural differences? Even if you have never been overseas – can you give an example of this here in the United States?

3) I believe that we all know what currency is – think about having a United States dollar in hand. From a financial management standpoint, why is it important to understand currency fluctuations? What are some of the key factors that cause fluctuation?
Please do not include the questions in your reply.

ANSWER

Organisations do not operate in a vacuum and are subject to governmental regulation especially with public traded companies. The United States government interferes for several reasons including economic reasons. One such reasons are protection of local smaller companies and industries from fierce international competition. Similarly, the government also interferes in providing a sound monetary system that acts as the fundamental framework for conducting business transactions. The government also provides a legal and social framework for business operations among many other functions. However, the most fundamental role is regulation. Examples of regulatory bodies directly related to financial management include the Federal Reserve Board, The Federal Deposit Insurance Corporation, The Commodity Futures Trading Commission and the Consumer Financial Protection Bureau.

Risk aversion refers to the conduct of an investors to prefer lower returns with well understood risks in comparison to high returns with risks that are not understood (Weber 1998). Risk aversion in some instances applies to cultural differences in different regions. For instance, in the United States, investors are known to be soft on risk in comparison to investors in an Asian country like China.

Currency fluctuations have a very important effect on both individuals and the economy. A good example is in buying a foreign car could be more expensive depending on the downward depreciation of a currency meaning that a consumer would end up paying more for the same product which a customer with a stable currency would not experience. Some of the factors that cause these fluctuations include inflation, political stability, exchange rates and import and export value among many other factors.

References

Weber, E., & Hsee, C. (1998). Cross-Cultural Differences in Risk Perception, but Cross-Cultural Similarities in Attitudes towards Perceived Risk. Management Science, 44(9), 1205-1217. Retrieved April 23, 2021, from http://www.jstor.org/stable/2634710