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Risk management:

(Company insolvency: why companies fail:Economies, markets, management, competitors, customers, suppliers…)1. Report on a bad performance of ….(a large company) – 5 DecemberImportant points to remember

Chapter: Reporting on performance

Page: 23Write a SHORT Summary: 2. Performance forecast of …(Coca Cola)

3. Presentation (5 slides)

FINANCE AND INVESTMENT

overseas investment inward / outward foreign countries

CHINA

1. high level of liquidity2. interested in the banking sector (skills)3. mergers / acquisitions (M & A market) (raw materials / global brands / skills)

Acquisitions

inbound acquisition – foreigners buy in China

outbound acquisition – Chinese buy foreign companies: iron ore, steel, coal mines move production sites to China to reduce costs

WHY into China?

a) regulatory reformb) breakneck economic growth of Chinac) entry to the WTO

Sectors: chemicals / automotive / banking

Difficulties in outward investment

political opposition

national security

START-UP CAPITAL(NEW COMPANIES SEEK OUTSIDE FINANCE)

risky ventures

innovation-based companies – new products / services

START-UPS(NEW COMPANIES)

Business plan IRR – internal rate of return IRR the annual percentage of return over the lifetime of the investment

Portfolio of investment – spreading risks

IRR calculation(potential investment good or not)

IRR of 60 percent = the principal + 60 per cent of the capital each year of the investment

Financing established companies

lower risk

debt finance – bank loans

1. already have a product / service

2. have made some sales / diminish market risk

3. existing management team lowers people risk

OPTIONS TRADING(RISKS AND REWARDS)

Porsche

success the core business market (selling cars)

financial engineering (sale of derivatives)

Porsche took over VW(2008 / 2009)

luxury car makers – were running out of fuel

Porsche – slow takeover (50%) via cash-settled call options

€6.8 bn from options trade €1 bn from selling cars

€400m from trading options on German companies

Possible scenario:

1. Porsche does not buy the rest of shares (75%)2. Closes its options position3. VW’s free float increases4. The price of shares falls

Risks

market conditions

unexpected economic and financial events

the company’s investors

investments – uncertain road