The theme dominating global financial markets today is the complexity of risks associated with financial globalization

Question

List and explain examples of the complexity of risks affecting the leading and managing of multinational firms in the rapidly moving marketplace.
What will be an ideal response?

Answer 1

Answer: The following is a sampling of this complexity of risks: 1) The international monetary system is under constant scrutiny. The rise of the Chinese renminbi is changing much of the world's outlook on currency exchange, reserve currencies, and the roles of the dollar and the euro. 2) Large fiscal deficits, including the current eurozone crisis, plague most of the major trading countries of the world, complicating fiscal and monetary policies, and ultimately, interest rates and exchange rates. 3) Many countries experience continuing balance of payments imbalances, and in some cases, dangerously large deficits and surpluses. 4) Ownership, control, and governance vary radically across the world. 5) Global capital markets that normally provide the means to lower a firm's cost of capital, and even more critically, increase the availability of capital, have in many ways shrunk in size and have become less open and accessible to many of the world's organizations. 6) Financial globalization has resulted in the ebb and flow of capital in and out of both industrial and emerging markets, greatly complicating financial management.