In frontier markets, diversified holding companies act as internal capital markets, routing equity across subsidiaries to balance risk and liquidity. The simulator computes internal capital coverage by weighting each business by its captive domestic financing share, contrasting sheltered sectors with foreign exchange exposure. When you switch presets or adjust sliders, capital reallocates instantly, demonstrating how internal capital shields cash flow against currency shocks.
How does this simulator calculate internal capital coverage and foreign exchange exposure across subsidiary sectors?
This interactive model visualizes a diversified conglomerate's internal capital market as a force-directed network graph centered on a parent holding company. In economies with shallow or volatile external debt markets, groups reallocate liquidity and captive cash flows across operational units. The simulator calculates three weighted summary scores: Internal Capital Coverage (ICC), Foreign Exchange (FX) Exposure, and an employment multiplier, directly from user-selected sector allocations and fixed baseline coefficients.
The sector weights (such as a 70% captive financing share for cement or 20 jobs/$1M for retail) are fixed educational heuristics rather than econometric measurements from audited group accounts. Furthermore, toggling the 'Macro Shocks' panel options (FX devaluation, credit tightening, and supply disruption) alters local configuration state but does not dynamically feed into the mathematical formulas for ICC, FX Exposure, or the Job Multiplier.
Clicking the 'Trade & Logistics' preset adjusts the conglomerate's sector distribution to 30% logistics, 25% agro-processing, 20% banking, 15% retail, 5% cement, and 5% energy. Computing internal capital coverage as the weighted average of each sector's internal share parameter yields 0.7% (displaying rounded in the metrics panel), while foreign exchange exposure settles at 0.2% and the job multiplier displays 0.1 jobs/$1M. On the interactive canvas, the force simulation rearranges subsidiary node radii and link weights according to the updated sector allocations.
The visual network layout is powered by the D3 force simulation module, which solves particle positions using velocity Verlet numerical integration under center, many-body charge repulsion, collision avoidance, and spring link forces. d3-force | D3 by Observable
When subsidiary allocations change via sliders or presets, the simulator modifies node radius according to r = 18 + alloc * 0.22 and connects each subsidiary node to the central holding entity with a stroke width proportional to alloc * 0.06. d3-force | D3 by Observable
The metric arithmetic computes each metric as a weighted sum over active allocations: ICC divides the sum of (alloc * internalShare) by total allocation, while FX exposure divides (alloc * fxShare) by total allocation. For example, banking carries an internalShare of 0.5 and fxShare of 0.3, while retail carries 0.85 and 0.05 respectively.
In corporate finance and macro development economics, business groups often form internal capital markets to redistribute capital across operating entities when external debt and equity channels face high transaction friction or credit rationing.
Implements velocity Verlet numerical integration with many-body charge repulsion, center force, collision, and spring link forces to calculate dynamic network coordinates.