Analysis of Financial Risks in the Video Game Industry and Future Trends

Abstract

Multinational enterprises face a variety of financial exposures when operating abroad that demand careful consideration. This thesis aims to address the financial risks and industry-specific risks faced by multinational companies within the video game industry and provide recommendations on how to mitigate them through a comprehensive research and analysis guided by the research question: "How can international video game companies strategically mitigate financial risks and embrace emerging market trends and technologies to ensure sustained profitability?” Multinational video game companies encounter various financial risks, these risks encompass fluctuations in foreign exchange markets, operational exposure, political risks, sociocultural risks, regulatory constraints, and concerns related to cybersecurity and data protection. Companies in the video gaming sector extensively generate revenue from overseas markets. Maintaining the company's long-term performance and viability in today's changing economic environment requires managing financial risk effectively. Furthermore, industry-specific risks in the industry, such as development challenges, delays, technological obsolescence, and new trends, contribute to the complexity of the video game landscape. Understanding and mitigating these risks is necessary for maintaining competitiveness and long-term profitability. The methodologies used include a comprehensive review of academic sources, industry reports, financial statements, and data published by companies in the industry. Additionally, a case study will be utilized to illustrate the consequences of failing to mitigate game development risks and not meeting consumer expectations. In conclusion, this thesis aims to provide actionable insights for multinational video game companies to navigate financial and industry-specific risks effectively, capitalise on emerging trends, and foster sustained profitability in a dynamic and competitive industry.