Question

xplain 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

International Financial markets plays a very important role in overall risk management of a company because these days companies operate internationally and any exchange rate fluctuation as well as fluctuation in interest rate across other nations will lead to fluctuation on the books of accounts of the company.

So, this financial markets helps the company in order to hedge various kinds of risk exposure, it has got domestically as well as internationally. It can hedge its exposure through various kinds of contract which may be forward-looking contract for future looking contract or risk sharing contract.

The role of credit rating agencies is to issue various kinds of credit ratings forecasting the performance of various companies so that it provides and estimation about the future performance of the company in the global scenario. So, a company can derive various types of conclusion out of it, and take proactive measure in order to emphasize upon its solvency and enhance its solvency, so that it can survive and sustain through adverse economic scenario and improve its credit rating