International Finance: Recent Developments, Financial and Risk Management Strategies, and Financial Performance Analysis of British American Tobacco

INTERNATIONAL FINANCE

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
British American Tobacco...........................................................................................................1
a) Two recent developments in the International Financial Environment impacting the
organization's performance..........................................................................................................1
b) Two key elements and the international financial and the risk management strategy of the
organization in its respect............................................................................................................3
c) Analysing the financial performance of the two consecutive financial periods using the
accounting ratios for the organization.........................................................................................4
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9
APPENDIX....................................................................................................................................10

INTRODUCTION
International finance is one of the significant functions for all the multinational
enterprises in the business considering all the monetary transactions that take place across
borders. It counts for foreign direct investment, imports and exports and the currency exchange
rates that are taking place between two or more countries. The current project shall be discussing
over the two recent developments that have been undertaken in the International Financial
Environment impacting the performance of British American Tobacco. Apart from that it shall
be highlighting over the sources of fund and the dividend as the major elements in respect of
which the international financial and the risk management strategy have been formulated. Lastly
the financial performance of the British American Tobacco shall be compared over the two
recent consecutive periods by the technique of ratio analysis of the annual reports as published
by the company.
MAIN BODY
British American Tobacco
British American Tobacco is the multinational company that has been registered on the
recognized London Stock Exchange. It is the international tobacco group that manufactures and
sells the cigarettes, tobacco and the nicotine products across many countries in the world. It was
established in 1902 and is headquartered in London being one of the largest company in the
tobacco industry of the world. It can evidently be observed that the success that is capitalized by
the company over the period is with the help of customer centric approach and the multi-
category consumer goods that the company offers to meet the expectations of the customers.
a) Two recent developments in the International Financial Environment impacting the
organization's performance
There are various developments that have taken place over the time for the business who
are internationally operating and conducting their operations (Aziz and et.al., 2021). These
businesses are highly impacted by the developments and the newer policies that take place in the
international financial markets of the company. Similarly, there are recent developments that
have impacted the business of British American Tobacco in terms of its business performance
and the operational efficiency. These major developments are:-
 Due to the high level of recessionary conditions the money market fluctuations have been
initiated by the central banks as well as the government of the country. There were high
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level of the funding pressures in the company and on the international markets as well,
which lead to the narrowing down of the spreads between the LIBOR and the overnight
index swaps (What are the recent developments in global financial markets? 2021). The
banking industry pressure also increased due to the high level of the lending but in turn
no security for the repayment, this gave rise to the government guarantees over the loans
that are provided by such companies.
 The banking sector had problems internationally depicting that the recessionary
conditions shall be leading to the increased rates of the defaults pertaining to the
business. Since the risk tolerance capacity of the market is low and it can lead to the
volatility of the market. Then to improve the situation the Federal Reserve approved the
application of the ICE Trust. Post becoming the member of such trust the central
counterparty services shall be provided for the CDS contracts that are inducted by the
businesses (Hellmanzik and Schmitz, 2017). The credit risk associated with the CDS
transactions are being assumed by these trusts that are being formed.
 The easing of the short term interest rates led to the significant cut in the policy rates and
the inflation is disappearing and the recession is further deepening for the companies.
This was to make the financing of company operations easy.
It can be assessed that the British American Tobacco shall be highly affected by the various
international policies and the developments that are taking place in the global markets. This is
because there are huge networks of the company that are globally built. Now since the BAT is
operating internationally it requires huge funds for financing the operations. In this case the
recession is highly affecting the liquidity of the company and this increases the risk of default on
the existing loans. Apart from that the poor credibility shall be leading to low accessibility to the
loans for the company. In this case if the Central banks, Federal Reserve and the Government of
the country take the effective measures and initiatives for solving the problem, then that shall be
positively impacting the productivity at the company. If the interest rates are lowered,
government guarantees are provided or the trust to support the counterparty transactions are
established then that shall ease the problems and smoothen the business functions.
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