What are the current issues in finance due to globalisation?

Answer 1

While the current issues in financing of corporations in a global environment are many, several factors my prove more influential in today's economic environment. Access to credit, fluctuations in exchange rate exposure, manipulation of currency by central banks, and impending interest rate increases include several risks firms face when operating in an international context.

Currently access to credit remains relatively muted, although capital markets are beginning to show signs of life during the beginning stages of a global recovery. Lenders, however, remain reluctant to grant long-term fixed rate commitments with interest rates near generational lows.

In addition, the proactive approach of foreign (and domestic) governments to utilize fiscal policy as a tool to revive their respective economies has led to a foreign exchange market which has shown relative volatility as compared to the past decade. Threats of default by many sovereign borrowers has exacerbated this volatility in the midst of a global financial crisis. Consequently, firms operating across national borders must manage this exposure to greater risk.

Finally, in attempts to promote domestic growth, many countries are currently manipulating their currency in a fashion which creates an attractive export product for purchasing nations. This manipulation hinders the free flow of capital amongst competing nations and may pose challenges for firms looking to finance operations overseas.