Business Risk in an Uncertain Global Economy Essay

Business Risk in an Uncertain Global Economy - Essay Example Thus, in the coming years, such an environment would potentially continue to disturb the business houses across the world. Therefore, so as to remain competitive and preserve their business in such competitive environment, companies have to ascertain that they respond spontaneously and are agile enough to adjust to the changing business environment (Economist Intelligent Intelligence Unit Limited, 2009). Consequently, in an atmosphere where businesses have to encounter continuous change, companies depend on strategic management of their business risk. In this regard, a number of business firms depend on long-term strategies, while on the other hand others rely on short-term policies to deal with the aggressive and demanding business atmosphere (Oliver Wight International, 2008). This paper would focus on the challenges and risks associated in conducting business in an uncertain global economy. The risks can be of various forms and they can be inherent as well as can arise from the di fferent strategies adopted by the business organizations. In addition to comprehending the associated risks and challenges of operating in an unstable economic environment, this paper would emphasize on the various techniques used by financial managers to tackle such business risks while trading and investing in nations outside the firm’s home country. Global Challenges faced in an unstable economic environment As already discussed, business organization can adopt either short term or long term strategies. Both long term and short-term management policies plays a vital role in the efficient business market. However, the business policies that emphasize on escalating the near-term returns are also likely to threaten the enduring financial value of the business by taking up considerable risks and taking in short-range thinking in the business and its numerous operating segments. This is predominantly accurate for firms functioning in the financial industry. The short-term busin ess outlook of companies makes it critical to encounter and tackle the challenges of operating in unstable global economy and can be highly detrimental for the companies themselves. Several researches have illustrated that a vast number of chief financial officers would abstain from possible future economic value in order to realize the investor eagerness and expectations for immediate positive returns. In majority of the cases, the systemic risks, wide-ranging impacts and irreversible costs of short-term management policies are being rated too low or underestimated (Forum for the Future, 2011). To put it in simpler terms, the tangible gains that can be acquired in the immediate future by the execution of short-term policies by and large make the business firms, principally those functioning in the financial services industry to neglect the long-term intangible gains that could help in the enduring sustainability of the firm. In general, it has been widely stated that a big number o f companies have started following a short-term thinking style. However, Brochet et al., (2012) have stated in their editorial named, â€Å"