Question

Explain the role of international financial markets and institutions in global environments in evaluating their impact on the company’s risk management strategies such as the role of the credit rating agencies etc.

Answer 1

Role of International financial markets and institutions like credit rating agencies in global environments in evaluating their impact on the company's risk management strategies:

1. Rating agencies analyse the credit risk of certain debt securities and the entities which wish to borrow funds. They also provide individual assesment of the creditworthiness of Government issued bond securities.

2. Such ratings prove to be useful in international finance transactions as well, including asset backed securities, collateralized debt obligations etc.

3. Rating agencies also evaluate the sovereign borrowers like Government.

4. Other international financial institutions also play a pivotal role in economic and social development programs of nations. The main goals of these entitiesinclude reducing poverty at the global level and increase people's standard of living, to promote global cooperation and integration, promote sustainable , socio-economic development of global markets.

5. All the above mentioned goals are achieved by granting loans, credits to National governments.

6. Financial institutions also provide technical advices and assistance to the borrowers via extensive research.

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