Ethics and International Finance

Ethics and International Finance
Take-Home Examination Questions (30 marks)
Please answer all 6 questions. Each question worth 5 marks. You need to justify your
answer with an appropriate example in each question.
1. Compared to other industries, why do you think ethical conduct is so critical for the finance
industry to get right? Discuss using at least one (1) real-world example. (300 words)
2. You work as an investment adviser for a large financial services company, providing
investment recommendations to retirees in Australia. You have a mutual referral arrangement
with a stockbroker: She refers clients to you that require services for indirect or non-listed
assets and structures (e.g. managed funds), and you send to her clients that require services
for direct, listed assets (e.g. shares). She has referred to you over a dozen clients in the past
year, whilst you have only referred 1 client. As such, she is concerned that the referral
arrangement is not working for her. To keep her happy, you promise to refer 1 client per
month going forward.
In discussion with clients, you begin to push clients to consider investing directly in
shares through a stockbroker, rather than using indirect vehicles. Whilst direct shareholdings
are not appropriate for the clients that you speak to, you still manage to convince 1 client each
month to use the stock broker’s services.
a. Identify the ethical dilemma you face in this situation, along with the main stakeholders
that could be negatively affected. (200 words)
b. Discuss what your employer might do to eliminate such behaviour in the future. (200
words)
3. Social Return on Investment (SROI) is one tool for measuring the social impact generated by
an organisation or project. It does so by benchmarking social outputs, such as meals provided
or vaccines delivered, and assigning them financial values ($).
a. Consider the main approaches to ESG investing. (200 words)
b. Identify which approach is most likely to use SROI as part of their portfolio construction
considerations. (200 words)
4. The recent past has seen a rise in anti-globalisation rhetoric and policy. Discuss the current
trend in trade protectionism by comparing this to the theory of mercantilism. Identify possible
causes for this trend. (400 words)
5. Helania is a small country in Eastern Europe with a hard peg currency system that uses the
euro. The country is undergoing a string of financial deregulations and is considering adopting
a new FX system. As such, the Helanian government is considering creating its own currency,
the Helanian ‘Hela’. To do so, the government is considering two system options: (1) a
conventional-pegged arrangement to the euro; or (2) a free-floating Hela.
a. Discuss how these new systems would compare to their current arrangement (200 words)
b. Identify the main disadvantages to adopting either system. (200 words)
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6. Safari Australia is an Australian tech company that produces wearable technology for
professional and amateur athletes. All of its production is done in Australia, with the only
major component sourced from overseas being semiconductors (in US dollars). Its annual
revenues exceed $120 million and it currently has markets throughout Australia, North
America and Europe. To increase the visibility of their products, and also as a tool to open up
to the rest of the world, the company has decided to accept Bitcoin as a means of payment
for their product. They expect that by the end of the year, 10% of all sales will be in Bitcoin,
with the remaining sales mainly being made in Australian dollars (20%), US dollars (45%), euro
(15%) and UK pound (5%).
Against this backdrop, the finance manager of Safary Australia believes that the US
dollar will depreciate significantly over the next few months and that price of Bitcoin will swing
up and down wildly.
a. Discuss at least two (2) factors that might cause the downward pressure on the US dollar
along with the effect of the depreciating currency on Safary’s final earnings. (250 words)
b. Identify how the US dollar depreciation and the Bitcoin price volatility might be managed
by Safari. (250 words) Ethics and International Finance

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