Dr. Ana Machuca
The University of Maryland University College
March 19, 2013
“Standardization of financial accounting has tended to follow the integration of the markets served by the accounts. International accounting standards create more transparency on the financial market. This provides investors more accurate information on company profiles” (Beke, 2010). Multinational organizations within all industries have a mandate to comply with providing privacy, data protection laws, following regulations and policies, which protect the sensitivity and confidentiality information of individuals. Since these compliances are required, organizations will do well when adopting and implementing activities that relate to professional dedicated personal, processes and technology that will curb costs and risk. Multinational organizations are subjected to ensuring they have allocated monies set aside to pay for non-compliance penalties, both legal and non-legal. An average cost of compliance for these organizations can be or exceed millions of dollars, but failure to comply could be more costly.
Compliance activities can assist in avoiding problems that disrupt a business, cause reduction in productivity, non-legal and legal settlements, fees, penalties and other costs. “Internal control effectiveness is important to firm managers, internal auditors, stakeholders all staff members of the firm for decision making and controlling firms to achieve organization purposes and especially a reliability of financial reporting” (Kanyamon, & Sumalee, 2012). Multinational organizations are emerging in markets with their operations expanding to two or more countries at a rapid pace with well over 65 companies worth billions in US dollars and still growing. The reasons point to mergers and acquisitions, new market searches, technology and innovation, less stringent government policies, and timing.
Financial Management in Multinational Organizations
“The country of origin is an important determinant of how multinational enterprises (MNE) behave around the world with regard to their subsidiaries” (Cortez, 2012). There were will be positives and negatives surrounding the details of a company’s transaction and capital costs while conducting business globally. As for the multinational companies, most of their monies are spent on preparations and audits of their accounting reports for better transparency of their economic stature and maximization of profits. Early in the 20th century showed an integration of national accounting system that were unified within the U.S. but soon incorporation of the standardized principles of international accounting serve as accounts for the markets.
A businesses data performance is relevant to any changes concerning the forecasted future changes of its economic resources and profits. Financial forecast trends allow data of a business’s potential of raising cash-flow or successful use of existing or additional resources. An adoption of financial and administrative service centers that are shared amongst corporations, would be beneficial to a countries financial forecast, thus giving better transparency of risks and allowing small investors to make wiser decisions on their investment choices and be competitive. Corporations are increasingly aware of their investing and funding financial risks in areas of foreign market exchange exposure and interest rates. “Their awareness results from new regulatory pressures, such as Sarbanes-Oxley and its global equivalents (e.g., European Union 8th Company Law Directive; Bill 198 in Canada, Financial Instruments and Exchange Law in Japan), other regulatory requirements, and an increased emphasis on corporate governance” (Polak, Robertson & Lind, 2011). Multinational Corporations could implement these potential improvements for efficiency:
Managing payments /