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Economic Risk - Literature review Example

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The author of this paper focuses on the economic risk faced by Italy. The risk management standard in this particular case is related to change in public health policy with regards to the use of cannabis. Change can be loosely defined as making things different…
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Economic Risk
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Download file to see previous pages Risk is inevitable in every business operation given that some situations cannot be avoidable due to uncertainties that may be encountered (Morris, 2008). However, the risk is not only limited to business organizations given that it can also threaten to destabilize the whole economy of a country if certain measures are not put in place. Economic risk such as the one given in this particular case is mainly a result of speculative actions which can result in an unprecedented decline or increase of stock markets (Jones, 2007). Due to an increase in interest rates, Italy is faced with the risk of failing to meet the obligations for its bond.
Bonds are often considered as a low-risk investment as a result of the fact that their repayment period is relatively longer. An increase in the interest rates can also impact on the original value of the bond (Correia, 2005). A bond with lower rating risks to attract more interest rates which are another threat faced by France in this particular case which risks losing its AAA grade. If the rate of the bond is lowered like what Alex Hawks is suggesting, then the welfare of the people is likely to be impacted negatively which also risks the stability of the country. There are likely chances that the level of welfare of the people will be lowered if this problem related to bonds is not carefully addressed.
However, Ross et al (1988) posit to the effect that a stable rating of the bond is the best in as far as the aspect of debt through is concerned. The stability of this rate can be negatively affected if there is discontent in the political situation of the country. As aptly stated by Gary Jenkins, speculation that change in leadership can bring about a turnaround in the fortunes of Italy’s debt situation may be futile given that the problem is not purely political. Whilst there can be short term benefits for change in political leadership, it can be noted that such a decision does not provide a long term solution though.
As such, it can be observed that the economic risk faced by Italy is a result of a combination of factors and a holistic approach has to be taken in order to address it rather than just dealing with political leadership. Addressing such a risk issue should not be one-sided since this can pose serious threats to the already bad situation. An objective approach has to be taken rather than relying on subjective judgments that may not address the problem.
Reuvid (2010) suggests that some actions may threaten the existence of an organization if a holistic approach is not taken to address them. In as far as the management of risk is concerned, there is the need for the responsible authorities to identify the causes of the problem obtaining on the ground as this can enable them to come up with a long-lasting solution in dealing with this particular problem.
In the case of the health and safety field, the consequences are seen from a negative perspective hence the efforts to manage safety risk are directed towards prevention and mitigation of harm (Waring & Glendon, 1998, pp. 5-6). By failing to prevent such hazards, it can be noted that such a situation can pose a threat to the health care of the people. ...Download file to see next pagesRead More
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