Global Finance Environment - Essay Example

Other than trade, globalization has affected the social realm through change in social relations and customs change in consumption patterns and lifestyles, and through important domain values like religion. Additionally, globalisation has affected the political ream through the widespread of multiparty democracies, pluralism, free elections, human rights, parliamentary systems, and independent judiciaries. This paper will focus on the global finance environment addressing some main drivers of globalisation, risks associated with globalisation, and the importance of cultural sensitivity to global finance issues.

OECD statistics reveal an increasing trend in global trade patterns. Driving Forces of Globalisation The first main driver to globalisation is advancement in technology in the fields of ICT and transportation, which has reduced the costs of trade. Internet enables global interconnectivity where people can interact and pass information regardless of the physical proximity. With the interconnectivity, firms who have reached their full-scale production in their home country prefer to cross borders and secure other smaller companies.

They do this through amalgamations, joint ventures, or partnerships. Internet has lowered the cost of transmitting and communicating information empowering multinationals. For instance, a company can have one CEO abroad who oversees all the operations of a company through the internet. Additionally, multinationals management team can use teleconferencing to communicate and hold meetings where each of them is contributing. With better technology, the cost of shipping has come down due to containerisation and bulk shipping.

In addition, competition between airlines has lowered the costs of travelling abroad on business. Secondly, multilateral trade liberalisation has boosted globalisation. Globalisation involves creation of linkages between nations. One means of achieving interconnectedness is through reducing pre-existing barriers to trade through liberalisation. Countries trading with each other have collaborated and reduced trade barriers between them increasing their potential to grow. Statistics reveal that over the last decade average tariffs has gone down from 30% to 10% in developing countries and from over 9% to 4% in developed countries.

Successful economic reforms on the emerging markets have fostered globalisation. For instance, India’s economy was in a bad state in the early nineties and the country was almost defaulting in payment of its loans. Economic reforms like working in favour of a more open market and market-oriented economy has enabled the country to pick. Liberalisation was another move that enabled India to venture its products in the international market. In fact, India scrapped off the industrial licensing regime, reduced the number of areas reserved for the public sector, and reduced in tariffs and rates (Rodolphe, 2010).

Lastly, migration is a main driver to globalisation. Often, people migrate in search of greener pastures or because of political instability in their country. Widening inequalities has increased pressure on the citizens to move. Statistics reveal that in America alone over 38 million of its population consists of persons born abroad. At least one person in 10 living in developed