Financial Globalization Essay - 1808 Words

Executive Summary During the past two decades, financial markets around the world have become increasingly interrelated. Financial globalization has brought considerable benefits to national economies and to investors, but it has also changed the structure of markets, creating new risks and challenges for market participants and policymakers. The international marketplace continues to present opportunities for companies. But change is constant and prudent so companies must work to minimize their risks while maximizing their opportunities. The International marketplace can offer considerable financial returns to companies conducting business but there are risks that have to be considered such as trade, foreign exchange, cash management,†¦show more content†¦This happens with the increased flow of goods (trade), foreign direct investment, money (finance), and/or people (migration). While globalization is not new, the speed, depth, and scope of the changes on the globalization are novel by techn ology. Also new to the mix is the enormous power of International Financial Institutions (IFIs) and global trade groups such as the World Trade Organization (WTO) to set the rules of the global economy. (Holmes 2005) Financial institutions play a vital role in the global economy. They are generally referred to as IFIs, a generic term given to all financial institutions operating on an international level. IFIs range from development entities such as the World Bank and the European Bank for Reconstruction and Development (EBRD), to monetary authorities such as the International Monetary Fund (IMF). These organizations provide loans to governments for large-scale projects, as well as for restructuring and balance of payments (on condition that they make specific changes IFIs believe will boost economic growth). (Holmes 2005) 2. International Financial Institutions While each organization came into existence under different circumstances, each is vital to economic growth around the world and to the global economy. 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