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GMS 723 (10)
Chapter 5

GMS 723 Chapter Notes - Chapter 5: Overseas Private Investment Corporation, Foreign Exchange Controls, Foreign Exchange Risk


Department
Global Management Studies
Course Code
GMS 723
Professor
Michael Manjuris
Chapter
5

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GMS 723 - Chapter 5 Completing a Successful Transaction
1
Introduction
Steps for completing an import or export transaction
1. Financing
2. E-banking
3. Avoid risk
4. Letters of Credit
5. Physical distribution
6. Documentation
Financing
All businesses need new money new money is money that is not yet earned but can become the
engine for growth
For importer, financing offers the ability to pay for the overseas manufacture and shipment of
foreign goods destined for the domestic market
Exporting, financing could mean working capital to pay for international travel and the marketing
effort
The Bank
Commercial banking is the primary industry that supports the financing of importing and
exporting
When shopping for a bank, look for the following:
A strong international department
E-banking
Speed in handling transactions
The bank’s relationship overseas bank
Credit policy
E-banking
Banking transactions electronically without physically visiting an institution
Terms/Forms of electronic banking:
Personal computer (PC) banking
Internet banking
Virtual banking
Online banking
Home banking
Remote electronic banking
Phone banking
Most frequently used: PC banking, Internet or online banking
Internet banking uses the Internet as a delivery channel for bills, transfers, etc
Some Internet Banks exist without physical branches - - Web banks are not restricted to conducting
transactions within national borders and have the ability to conduct transactions involving large
amounts of assets instantaneously
Attractions possibilities for remote account access including:
Availability of inquiry and transaction services around the clock
Worldwide connectivity
Easy access to transaction data, both recent and historical
Direct customer control of international movement of funds without intermediation of financial
institutions in customer’s jurisdiction
Forms of Bank Financing
Loans for international financing falls into two categories: secured and unsecured
Secured Financing
Financing against collateral is called secured financing and is the most common method to raise
money
Reduce exposure to loss
Another popular method is the banker’s acceptance (BA) a time draft presented to a bank by an
exporter
This differs form what is known as a trade acceptance between buyer and seller in which a bank is
not involved.
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