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Unformatted text preview: UNIVERSITY OF SOUTHERN CALIFORNIA
Marshall School of Business
INTERNATIONAL FINANCIAL MANAGEMENT/FBE 436
Professor Aris Protopapadakis LONG VIEW RISK ASSESSMENT PROJECT INSTRUCTIONS
A large part of this course focuses on valuation, and one of the key ingredients of valuation is identifying
opportunities and assessing risk. Imagine that you are employed by the strategic planning group of a major
corporation, or in an equivalent government function. You are asked to look ahead 20 years or so, and assess the
state of the world economy. Your report and that of your colleagues will provide basic information for the longterm corporate strategic plan as to which economic and geographic areas to direct resources and where to reduce
Each team has to choose one of the following topics or propose to me a different topic. The topics are not entirely
independent. There are two parts to the report. The report has to start with an “Executive Summary” paragraph that
summarized your conclusions. The report should be short, no more than 6 pages, not including any tables or charts
you may wish to have.
By the stated date in the schedule, each team should submit (by e-mail) THREE topics of its choice, in order of
preference. I will let each team know its topic soon after.
The project report should:
1. Provide some baseline information about the current state.
2. Provide a qualitative forecast as to where you see things in 20 years.
We will devote class time to an extensive discussion of these issues. You will be asked to present your report, and
you should be prepared to discuss and defend your position in class.
I will ask you to prepare a 1st draft by the date stated in the syllabus. The draft should at least have an outline of
what you are planning to do, the data sources that you have consulted, and whatever data or interpretation
difficulties you are encountering. I will supply prompt feedback to help you to complete the project. TOPICS
Petroleum & Coal: 20 years from now, will petroleum and coal continue to be the major sources of energy? What
is the likely price of oil/barrel? Is exploration for oil & coal a good financial bet? What are the prospects for shale
oil in Canada and the U.S.?
Alternative Energy Sources: What is the prognosis for new (and old or resurgent) emerging energy sources in lieu
of coal/oil/gas, and how important are they likely to be? Solar, wind, tidal, current, wave energy, geothermal,
hydroelectric, nuclear power generation? What steps must government take to promote alternative energy? IS
subsidizing alternative energy a “good returns” proposition economically, politically, or environmentally?
Agriculture: What is the likely place of the U.S. in the supply of agricultural products? Are prices of agricultural
products likely to continue to rise? Will other producers arise? Will agriculture continue to be a subsidized activity
in the US and the EU? How will the high energy and environmental costs of mass agriculture affect future policy
Raw Materials: The current view is that raw materials prices are rising because of rising demand from developing
countries. Are these price trend likely to continue? What prices would you forecast for basic commodities (steel,
copper, aluminum, wood, others) in 20 years. Project Instructions Environmental Concerns: How are environmental concerns (carbon emissions, other air pollutants, ground water,
lake, river, and ocean pollutants, carcinogenic substances, etc.) likely to affect consumption and production
Climate Change: What is the situation likely to be in 20 years with respect to global warming and green-house
gases? Are the developed countries going to be willing or able to mobilize resources to reduce such emissions?
Are they going to be willing or able to persuade with or without financial assistance developing countries to pursue
emission reduction policies? If they do not or cannot, what are some of the feared effects on the global economy?
Food Production & Security: There have been repeated incidents of food contamination in the U.S. and other
countries, food prices are rising, and there have been rice “shortages” around the world. At the same time, agripollution is a major concern (fertilizers, pesticides, antibiotics, etc.), and major fisheries are declining precipitously
with ocean pollution and ocean warming. Habitat degradation on land and sea, increased demand for some crops
for non-food uses (ethanol, sugar, others), consumer and political resistance to GM foods are also part of the
equation. What is the outlook for the food industry and for food prices in 20 years?
Health and Health Care: Health care and the large number of uninsured is a central debate in the U.S. Health
care costs are rising while population health seems to be declining. Obesity, diabetes, use of prescription drugs, and
air, water, and soil pollution are major concerns (army recruiters claims that something like 70% of high school
graduates are not eligible to enlist. They cite health, particularly obesity as a major issue). What is the outlook for
health care in the US and how is likely to affect business conditions?
Transportation: How will energy costs, air quality concerns, congestion, and climate change, change the way
cities grow? What will the automobile industry in the U.S. and around the world look like in 20 years?
Fresh Water: Most urban areas around the country experience droughts regularly, even in places where there is
plenty of precipitation. What is the future of our water supply? Where will it come from? Desalinated ocean
water, reclaimed/recycled water, the Columbia river, Canada, conservation, hydrogen powered vehicles that
China: China has been growing at very high rates in the last decade, and it is on the verge of becoming the 3rd
largest economy in the world. On the other, it is still a poor country. Clearly, what happens in China will have
significant impact in the world economy. What is the outlook for growth in China? How are the following likely to
affect the country’s growth? (i) internal political tensions, (ii) the growing income inequality, (iii) the growth-atany-cost environmental disasters that are being uncovered and reported regularly, and (iv) the totalitarian nature of
the regime going to affect
India: India is often labeled the “world’s largest democracy”. After a long period of low and sometimes negative
growth, India is emerging as a growth economy. It is soon slated to become the world’s largest country. Can India
stay on the path to rapid growth? Is it likely to become another low-cost producer? How might India’s growth
affect the world economy?
The Middle East: What is the 20-year outlook for the Middle-East (use a broad definition of the ME to include
Iran and Afghanistan)? Will there still be civil war in Iraq or will a civil society prevail? Is Iran going to still be a
theocracy? Is Iran going to become a regional nuclear power? Will there e another Middle East war?
Terrorism? Can the current brand of terrorism and its possible offshoots be curbed in the next 20 years? What
might be the main tools of accomplishing that? Is it likely that the current situation will deteriorate in a
religion/cultural confrontation? Note: Any price forecasts you may wish to make ought to be in “2009 $s”, in other words they ought to be relative
price changes rather than forecasts of inflation. 2 ...
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This note was uploaded on 01/16/2010 for the course FBE 436 at USC.