The purpose of this paper is to highlight and examine the key strategic risks for Koch Industries as they look to expand their market share to the Philippines. Furthermore, this paper will also outline a financial strategy for implementing this expansion by identifying the associated risks of foreign currency exposure, as well as addressing the major dimensions on international finance, evaluate the basic functions of the international banking system and financial market, and finally recommendations on the best way ahead for Koch Industries entering the Philippine market.
To begin, this paper will first examine the possible risks of foreign currency exposure for Koch Industries in the Philippines. As financial markets have become more global and fast moving, foreign currency exposure can have an enormous and rapid impact on profitability can be potentially catastrophic to even the most entrenched and successful companies. Managing exposure and mitigating risk is large and involved process, and has been shown that companies in western industrial economies are quite refined and cultured in currency hedging and conduct business with a modest amount of risk. However, while there is a plethora of evidence supporting the actions of western industries much less is available regarding companies in the rapidly emerging Asia-Pacific region. The results of a 13-year study conducted by Professor David Parsley, of the Owen Vanderbilt Graduate School of Management, found that “the basic issue is that many Asia-Pacific businesses haven’t hedged their exposure and face significant risk of depreciation of their assets or severe increases in their debt obligations held in foreign currencies”, he said. (Parsley, 2006)
Philippine financial and monetary authorities have stepped up practical rules and regulations for consumers as result of the financial crisis experienced in Asia