Investments And Risk Capital

Investments and Risk Capital

 An investment philosophy is "never invest in businesses that you cannot understand". Warren Buffett phrase, American investor and businessman. The world of the world of investments entails risks, which must be prevented and controlled. It is important to have knowledge about investments and what factors can contribute to general gain or lost in the market. It is necessary to understand, the political-legal aspects influence foreign investment, what type of controls can affect investment and risk, what are the characteristics in financial markets that affect global companies and effect of foreign exchange transactions in saidBusiness.

Foreign direct investment is a foreign acquisition of a controlling interest in a company or installation abroad. Foreign investment brings several benefits, such as very paid salaries, transfer and advances in technology and specializations in the area of management. What political-legal aspects influence foreign investment? Flaces, talking about foreign investment, it tells us: “The barriers to access markets are obstacles that are created within states to limit the volume of products or goods that are imported and that can cause damage to the marketDomestic, in other words, are measures that seek to balance the domestic market against the offer of foreign products. In this way, in the words of Hernández Díaz, barriers are those policies that set a country, which can contain tariff and non -tariff treatment to tax the products that enter from another country, in order to seek a balance between the goods producedIn it, either protect market failures, and the impossibility of measuring the marginal welfare of society.

In this sense, within the administrative barriers we find how, technical standards such as health and zoo measures can be established, as well as any other requirement that must be submitted to the merchandise at the time of its entry into the country. Therefore, it is found that the barriers have been classified as follows: (i) of quantitative type;(ii) qualitative;(iii) administrative;E (iv) tax;The latter that are most controlled through the conclusion of free trade agreements between the parties. Notwithstanding the foregoing, it is observed that there are other types of barriers which are not referred to de facto requirements in the exercise of commercial relations, but that they are imposed from iure, indirectly, since they are set as regulatory measures,either at the constitutional, legislative and/or regulatory level that impact the exercise of economic activity, affecting it, and even generating a decrease in these, and which we can call “legal barriers” ””. The aspects that will affect foreign investment will be those barriers that governments impose them and to protect national companies. For foreign investment they are a risk that must take into account at the time of a nation market. In addition, we must add the agreements available to the commercial treaties, which stipulate the types of controls to follow. As for the legal, foreign investment must take into account, those nations that offer judicial security, respect for acquired contracts and contractual permits. As a political, foreign investment will seek nations with political stability. Political stability, commercial and legal barriers and judicial security are aspects that foreign investment takes into account, at the time of investing. Nations such as China, India, Indonesia, Mexico, Brazil, are places that offer political stability and judicial security. Contrary to Venezuela, that the government retaliates with those citizens and industries, who are in opposition to the government.

There are several types of controls that affect the performance of global companies and agility in the economy. One of the controls is the bureaucratic. Bureaucratic control emphasizes adhesion to rules and regulations and formal control systems and impersonal administration. This bureaucratic control can have the same company for internal affairs. But when we talk about economics, they are governments, which impose these controls. Given to its complexity they serve as an obstacle for the economy to flow quickly. The subject of permissology affects time, investment and economy. When more bureaucratic obstacles are imposed, it is more difficult to sustain the investment, the expense that generates and affects the way of doing business.

The key concept through which I try to articulate ethnic group, culture and identity, is that of cultural control. Cultural control was used for many years in conquests, to assimilate residents of the conquered lands, the new winning culture. With the purpose of creating homogeneity. The basis of all culture is communication. According to Hitt, Black and Porter (2006), “several factors, such as cultural differences, increase the difficulty and complexity of the process … communication and culture are closely related. Culture would not exist without communication, and human communication only occurs within a cultural context. As the act of communicating is widely related to the environment, culture facilitates or hinders it. Thus, the similarity of cultures between the issuers and the receivers facilitates successful communication: the meaning that is sought is more likely to transfer. Cultural differences obstruct the process. How much, the greater the cultural differences between issuer and receiver, the greater the difficulties expected in communication ”. The nations that do not promote cultural diversity are those that have greater cultural control. Islamic nations of origin could have cultural control, such as Jordan, they will go among others.

Another control is financial control. Financial control can be understood as the study and analysis of the real results of a company, focused from different perspectives and moments, compared to business objectives, plans and programs, both short and in the medium and long term. According to Hitt, Black and Porter “these include several important quantitative reasons that involve key financial statistics. Although such financial data is always generated at the level of the entire organization, as well as that of organizational unit, they are especially useful, as a form of tactical control. The data used for the most important financial controls imply the fundamental analysis of cost-benefit ”. What is desired with financial control is to have the greatest compression of the financial situation of any organization. It seeks to prevent the concealment of information. In addition, financial controls allow preparing an analysis, to develop a prognosis of the organization’s situation.

According to Soriano (2013), "cost control can be defined as a management process that deals with measuring, depending on the criteria of efficiency and efficiency, the use of the resources that are applied to achieve the objectives". Cost control is vital for a company, because it allows a better understanding of cost information and how it affects the final price of the sale. For Soriano (2013), “Cost control provides useful information to determine the sales prices of products and services, control economic behavior and performance, and allows you to obtain the exact figures required to evaluate more preciselywhat really happens in the organization ".

Both in globalization and in the world of investments it is important to stop investment and losses management control. Because risks will always be present. According to Patiño (2017) “The stock market investment always has accompanied the fact of assuming financial risks previously calculated for investor pockets, in exchange for trying to properly profiting its capital destined for investment. It is one thing to be clear at the beginning being a future inverter novel that in the markets is won or lost and a different one will be to assume these monetary losses, without this disastrous result ending with its “ephemeral career” in the world of money andpersonal finance ". There are three types of risk that companies face business risk, they are voluntary risks, to create competitive advantages in the market. Another risk is strategic risk. Strategic risk is based on economic and political changes. Finally, financial risk. Financial risk comes from volatility in financial markets. This risk is the most dangerous, it is not planned and will depend on factors that influence the financial market. A factor is the operational factor, it arises from deficiency in controls, errors in procedure and human error. Another factor is legal breach of legal norms that surrounds sanctions. Market behavior is another factor, which surrounds the interest rate, types of changes, inflation, growth rate, shares of shares and goods. This type of behavior the market generates uncertainty and is not at the control of the organization. The credit factor is a factor that looks like the loss of the company’s potential with respect to its credit. Finally the liquidity factor, this factor determines the risk of an organization, which cannot make its commitments due to lack of liquid resources. That is why it is important to prevent the potential risks that affect investment, for organizations they can generate the desired profits.

Ravelo, "some of the most outstanding characteristics of financial markets are: amplitude, depth, freedom, flexibility and transparency". The characteristics that are available to companies that operate globally are depth, freedom and transparency. Ravelo, talking about depth tells us: “This characteristic talks about the existence of demand and supply curves show. In other words. Depth has to do more with demand vs. offer and equilibrium price. If any company wants to sell their product and go below the balance price, to be more competitive in the market. As soon as freedom, that is, there are no barriers, but rather freedom in the pricing process (Ravelo, 2013). In the transparent Ravelo (2013), he argues: “It is simply the ease that investors may have to access all the important information to make decisions. Financial markets are more transparent if it is much better and cheaper to obtain the necessary information ”. Transparency is an important factor, allows information to be accessible and easy to obtain. Let’s not forget in terms of business, transparency is necessary.

According to Eiteman, Stonehill & Moffett, “the exchange market offers the physical and institutional structure through which the currency of one country is changed to that of another country, the exchange rate between currencies and the transactions of currencies are determined physically. Currency means the currency of another country;This is: bank balances, bank promissory notes, checks and exchange letters called foreign currency. A currency transaction is an agreement between a buyer and a seller that indicates that a fixed amount of a currency will be delivered by some other currency to a specific exchange rate ”. Due to globalization, global companies are subject to foreign exchange transaction, especially in the exchange rate of a foreign currency. This is reflected in bank transactions. For Eiteman, Stonehill & Moffett, “the global integration of capital markets has provided many companies with access to new and cheaper funds beyond those available in national markets in national markets. These companies can then accept more long -term projects and invest more in capital improvements and expansions. If a company is located in a country with markets of Ilíquid and/or segmented capital, you can achieve this lowest global cost and greater availability of capital through an adequately designed and implemented strategy ”but, on the contrary, Eiteman, Stonehill& Moffett (2011), tells us;“A company that must obtain its long -term debts and its accounting capital instruments in a highly illegid national stock market will probably have a relatively high capital cost and will face a limited availability of such capital, which at the same time will reducetheir competitiveness both internationally and in front of foreign companies that enter their national market ”.

One of Paulo’s most famous phrases is “when someone wants something, he should know that he runs risks and that is why life is worth it.”The risk is a factor that will always be present in investments. Foreign companies take into account that political-legal aspects affect investment. Governments’ decisions in political and legal terms will affect foreign investment. Global companies must take into account some controls that can harm them in their investments and there are others, which can help them understand the market. For companies it is important to understand the characteristics of the financial market. Because it will help them make better decisions, with information that generates trust. It is also important for an organization to understand the currency market. Due to globalization, companies can be affected.