Managing Financial Risk in an Unstable World

Managing Financial Risk in an Unstable World

Introduction

In this era of modernization and globalization whereby the world markets have merged together the role of the physical boundaries have decreased. With the increased globalization the transnational risks have also increased (Sellke & Renn, n.d).

The increased financial risks that have resulted due to the world economies merging among each other have increased the role requirements of the chief financial officers of the organizations around the world. The role requirements of the chief financial officers have increased from just being ordinary employees to team members of the management teams. The chief financial officers are more concerned with the long term strategic management of the organizations regarding the macroeconomic risks that the organizations are subject to. The chief financial officers are in particular concerned with formulating strategies which are consistent and overlap the organizational goals (Oxelheim et.al, 2012).

The macroeconomic risk management is concerned with many issues like the financial, operational and the strategic issues of the organization. The international risk management includes various issues like the management of interest rate risks, inflation, and the exchange rate risks.

The increase in the integration of the world economics for the purpose of international trade has made the firms worldwide exposed to many risks including the financial and other events that are a source of risks. The financial risks that arise may pose various threats as well as opportunities for the business organizations. The risk management strategies are designed by the financial managers in a manner that they best serve the corporate objectives of the business.

Discussion

The increase in the integration of the global markets has led to the generation of more resource supplies and demand globally and this rise in the need of the global supplies has also convinced the firms to assess the political risks of the countries worldwide which might at times outweigh the financial rewards of such transactions. The firms operating around the world are subject to many financial as well as the country related risks. Many firms around the world have been subject to various financial losses that have resulted from the nationalization of the firms. Many multinational firms have also fallen prey to the political expropriations which have rendered them to bear huge financial losses as they are not paid for their assets taken over by the elitist and ruling political party. The political risks of the ...