1.2.

Objective of the study To apprise the principal activities of Alico To apprise the different policies of Alico To identify the problems of Alico To suggest suggestions for the development of Alico

1.3. Methodology of the study The term paper was based on two sources of Data. These sources are the prime areas from where we have got the information about Alico thus to make it more easily we have defined our data in two parts which are the: primary and the secondary data. These are the two different sources that we have used to find out the information and to make the report.

1. Primary Data: The primary data was taken by us through the company visit and by the clients, employees, and related persons to the company of American life insurance company (ALICO) this helped us a lot by generating the practical situation of the companys activities. 2. Secondary Data: The secondary data was accumulated by us from the Books, Internet, the journal and much other relevant stuff directly related with the literature of the term paper. For our study purpose we used different statistical tools like regression analysis, growth percentage etc.

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Currency Risk A firm faces currency risk when its financial performance (cash flows) responds to changes in currency values. Consequently, its cash flows reflect a certain level of increased variation or risk. This heightened variation has the potential to disrupt the firm and decrease its value. Consider the simplest global activity: selling products in overseas markets. This activity results in earning revenues denominated in foreign currencies that are then converted to the domestic currency. A decrease in the value of the foreign currency relative to the domestic currency would lower revenues. Currency risk can be a complex issue because MNCs face exposure to multiple currencies. Consider firms such as General Electric that operate in many countries and are therefore exposed to a portfolio of currencies. Financial models for risk and diversification provide appropriate tools to understand currency risk in such a setting. However, some aspects of currency risk require much more sophisticated analyses than the mere estimation of diversification effects. For example, firms may have competitors from other countries whose cost basis is in other currencies. In this case, changes in currency values could have multifaceted effects on the corporations; among effects are the prices and quantities of goods sold. Chapters 6 and 7 explore these ideas and ways to manage currency risk.

Economic Risk Economic risk refers to the variation in cash flows caused by changes in macroeconomic conditions. In the context of international finance, it refers to the risks inherent in foreign economies. Influential economic factors are economic growth, inflation, interest rates, and employment. Because of increasing levels of integration, certain economic factors assume common values worldwide. For instance, inflation in energy prices is highly correlated across nations. Nevertheless, most economic factors have an imperfect correlation. An MNC wishing to operate in a particular country should carefully evaluate its economic risk factors. Consider the example of a U.S.-based MNC operating a subsidiary in Italy as a brief illustration of how economic risk factors such as growth and inflation in Italy can influence the performance of this firm.

 The first factor to consider is economic growth, which would lead to increased product demand in Italy. On the other hand, a recession in Italy would adversely affect product demand. The impact of economic growth is especially evident if the firm is producing and selling durable goods. Basic economic theory states that people tend to decrease consumption of durable goods during recessions. The second economic risk factor is inflation. High inflation would increase the cost of goods sold and adversely affect profitability. Inflation in output prices could result from inflation either in the cost of inputs such as oil and steel or in labor costs. Other factors also can affect the firms performance. Labor relations are one such factor. In Italy, a large proportion of the labor force is unionized. Unions there and in other European nations are able to conduct strikes and curtail operations more than unions in the United States. Political Risk Political (and regulatory) risks in foreign countries result from potential action by governmental and regulatory authorities. It has been said that only MNCs operating in emerging markets face this type of risk, but this is not quite true. MNCs face political risks even in developed nations. Generally speaking, firms are subject to all types of regulation pertaining to operational issues such as pollution, labor relations, and customer relations; governance issues such as shareholder rights and board of directors composition/responsibilities; and financial issues such as taxation, remittance of funds, and financing. MNCs need to have a core competency in dealing with regulations in multiple countries. Political & Economic stability of the country, attitude of government and public in the host country towards government of foreign investors Host countrys political & government administrative infrastructure. For example, number of political parties, frequency of change in governments, (this can cause frequent policy changes, and inconsistent & discontinuous economic and political environment. Track records of political parties and their relative strength, e.g. what type of ideology they support, what is the ideology of the main party?