Analyzing Risk Assignment Example | Topics and Well Written Essays - 1000 words

Analyzing Risk - Assignment Example Serious fluctuations in the exchange rates may raise expenses, diminish profit and hinder smooth financial planning (Holland, 2006). Brazil is one of the emerging markets thus making its currencies to be more sensitive to the market. Brazil has had an independent floating exchange rate hence making the country’s currency volatile. Inflation, liability component and credibility have been the major sources of exchange risk in Brazil thus making the exchange rate volatility higher in the country (Country Risk Analysis Brazil, 2014). Some other challenges that Brazil faces in with their foreign exchange risk are the fact that their import tends to grow faster than the export. This mostly originates from their large hydrocarbon import compared to their exports (Holland, 2006). However, exchange rate risk may not be a major threat in Brazil because of the recent positive developments. The good news is that Brazil’s economy has shown positive growth in the recent past. The Brazilian government has ensured that domestic inflation is decelerated and that interest rates are controlled (Country Risk Analysis Brazil, 2014). These measures have, to a certain extent, led to a stable currency. Foreign exchange risk may make running the new facility expensive hence hindering its success. Brazil is one of the greatest economies in the world. It is the 6th largest economy globally, with a growing active population and resistance to external shocks. However, the country faces many risks as a country including corruption, inefficient public expenditure, high cost of production and incomplete educational system. In 2014, economic growth was not at its best because of decline in household consumption and a high cost of production that affected industrial growth (Country Risk Analysis Brazil, 2014). There is insufficient rainfall experienced in Brazil that has also