Article review methodology and analysis

¶ … Finance Function of Global Corporation," discusses the ramifications of the increasingly global marketplace for CFO's and those in organizational decision-making roles as financial operatives. The author uncovers both positive and negative consequences of the opportunities afforded to such employees who must deal with issues at the local, national and worldwide levels while considering the impact of their decisions on both subsidiaries and parent countries. In addition to stratifying contemporary responsibilities according to areas of finance, capital budgeting and risk management, he also offers a series of best practices that allows individuals and entities to take advantage of changes in the emerging global marketplace.

One of the strengths of this document is the author's usage of actual case studies to illustrate many of his concepts. From this point-of-view, he is at his best when detailing the global capital budgeting mistakes of Japan's Asahi Glass or AES's missteps in the early 1990's related to poor valuation decisions for investment opportunities. As elucidating as some of these examples are, however, there are certain points in the article in which there appears to be a dearth of analysis of these case studies. This fact is most eminently reflected in the global capital budgeting section of the article in which he chronicles companies' capital mishaps, yet devotes precious little attention to more profitable approaches. Or rather, he simply alludes to more advantageous measures, cautioning against "adopting a narrow financial approach" that results in "an outcome directly at odds with the company's strategic investment" (Desai, p.2).

Still, it is this sort of understatement which lies at the root of the author's intention in writing this article. In many respects, this piece of literature functions as a means of enlightening financial professionals about the (literal) world of opportunities around them, and urges them to abandon traditional thinking based on a local or domestic view of an organization. The principle theme of the author's article is that because of increasing efforts towards globalization, financial responsibilities for many companies include not only conventional ones but the management of "what amounts to internal markets for capital" (Desai, p.1), which is a reference to the common trend towards having international subsidiaries. Due to differences in currency, local political and economic conditions, the effective management of those subsidiaries requires a wider, less streamlined approach than simply managing a traditional company in one domestic location does.

One of the more effective passages in which the author reinforces his assertion that the financial management of international subsidiaries is substantially different from the conventional notion of financial management is in the section where he discusses a multitude of financing options afforded by international subsidiaries. In this passage, he elucidates a number of specific options that readers can readily take advantage of, which provides the best support for his theme. For instance, he explains how it is possible to exploit differences in tax and interest rates in international settings by the usage of prudent lending and sizing of profit flow. He also explains the beneficial effects of funding companies abroad in order to gain a financial and political interest in them and in their surrounding countries. This tactic weakens the internal market yet strengthens the parent company (Fan et al., 2008). Additionally, the utilization of internal capital allows for more effective monitoring than bank lending (Gertner et al., 1994, p. 1211). These options simply were not available prior to the current global marketplace, which is why the author's deconstruction of these tactics and their effect on international financial management well support his primary argument that CFO's need to be cognizance of financial differences in today's market.