Types of risks encountered in the globalized and liberalized world economy

 

Risks are plentiful and enumerating all does not make bigger sense. What seems to be reasonable is to show what their sources are. Generally we can divide the sources of current economic risks into a number of categories.

The first group of risks is linked with the application of policies and tools which were correct to apply in other conditions. Before listing some examples illustrating such policies or tools it is advisable to explain why the previously used policies lost their power and create a burden or obstacle towards recovery. It is relatively clear that the economy has changed with processes such as regional integration, liberalization, internationalization and globalization etc. All of the mentioned processes are perceived by economists and politicians but this fact is rarely transmitted into a change of applied economic or financial policies, which creates additional costs of different types (economic, financial or social). Most of the policies continue with the assumption that they are applied solely in a national economy, which is untrue as the economic borders were lowered or completely eliminated. This fact eliminates the effectiveness of previously applied policies.

The second group of risks is linked with changes in the economy due to the advancement in development, opening of the economy, movement of production factors, increasing effectiveness of their use and innovations. Such changes, which can be considered as progressive and desirable, all in all make the definition of the national market blurred as compared with the external environment. This mainly concerns developed economies, which are the most liberal in their economic external policies. Nevertheless this is what happens in developed economies and has a specific impact on the rate of growth in other groups of countries, namely the so called emerging economies, catching up economies as well as the developing economies.

The third group of risks derives from the fact that economies are interdependent which makes them more vulnerable to positive and negative impulses from abroad.

The fourth group of risks comes from misinterpretations of the source of diseases which in turn is followed by wrong prescriptions to cure them.

The fifth source is closely linked with growing tensions between states and within their structures which are relatively easy to overcome in the conditions when the economy grows but is difficult when the rate of growth is low or negative. Nevertheless, such tensions are not serious enough to lead the countries to withdraw from the groupings but at the same time it is relatively difficult to reach a consensus on deepening and continuation of the formerly chosen road of integration.

The sixth source can be ascribed to the fact that the majority considers all of the faults in the economy (relatively low rate of growth, high unemployment, high budget deficits or even twin deficits of the budget and current account) as a result of mistaken policies applied within the frames of the monetarist vision of the economy.

The seventh source is linked with the digitalization of the economy, mainly communication, banking, payments and services etc. This speeds up the transfer of data, information, money and people. Nevertheless it is not limited only to acceleration of the dynamics but it also enables the continuation of transactions on stock markets around the clock, for 24 hours as when one stock market closes – others still work or will start to work. Transactions can be conducted from a distance which enables the continuation of them without the need to break for the night hours as it was in the past.

In all cases the sources are closely linked with what is labeled as an economic policy, which embraces engagement of the state in the economy (model, scale or scope), financial activity (interest, value of exchange rates, the structure of the state budget with tax policy and expenditures, size of the deficit and the size of the public debt), regulations concerning starting business, laws and institutional solutions concerning the labour market, educational systems, and the competition policy etc. It is important to have all of the mentioned features of the market matching one with another, all in all[1].

 

1. The title of the article reflects relevance of the topic. It`s about possible losses in the current conditions of the world market.

2. This topic does not need special graphic effects, because it presupposes only a description of some various risks.

3. The main topic of the article is the sources of current economic risks. The main idea is to show why there are risks under different conditions of the economy and what they are related to.

4. The article has many scientific terms, such as liberalization, internationalization, globalization, digitalization, emerging economies, transactions, public debt, budget, exchange rate. This underlines its scientific focus.

5. assumption – предположение

burden - бремя, ноша

digitalization -  оцифровывание, преобразование данных в цифровую форму
expenditure – расход

obstacle – помеха, препятствие

6. The article is taken from the book “Economic Security of Business Transactions” edited byKonrad RaczkowskiandFriedrich Schneider. It was published in 2013.

The article is a part of a bigger research which deals in views on the threats and risks arising from international trade and operating businesses.

The aim of the article is to help understand some of the issues of appearance of risks in different economic conditions.

This article provides an outline of the theoretical basis of the sources of economic risks.

7. The text can be logically divided into 3 parts:

a. Introduction to the state of the problem

b. Main part (groups of risks):

i. Application of incorrect policies and tools

ii. Changes in the economy due to its improvement

iii. Interdependence of economies

iv. Misinterpretations of the source of diseases

v. Growing tensions between states and within their structures

vi. Mistaken monetarist policies

vii. Digitalization of the economy

c. Conclusion. Connection of the sources of risks with economic policy

8. 1. In the first paragraph the author tells that the sources of risks can be divided into a number of categories.

2. The paragraph is about the first group of risks, which is linked with the application of incorrect policies and tools.

3. The main idea of the paragraph is that the second group of risks is linked with changes in the economy.

4. The paragraph tells us about interdependence of economies.

5. The author reports that the fourth group of risks comes from misinterpretations of the source of diseases.

6. The main idea of the paragraph is that the fifth source is closely linked with growing tensions between states and within their structures.

7. In the paragraph the author tells us about the appearance of risks due to the mistake of the monetarist vision of the economy.

8. The main idea of the paragraph is that the seventh source is linked with the digitalization of the economy.

9. The paragraph tells us about interrelation of sources with state activity.

 

1. There are many risks and the sources of them can be divided into several categories.

2. The application of policies and tools which were correct to apply in other conditions has lost the power because the economy has changed with processes such as regional integration, liberalization, internationalization and globalization etc.

3. Positive and progressive changes in economy primarily of developed countries make the definition of the national market blurred as compared with the external environment. And moreover, it has a specific impact on the rate of growth in other groups of countries.

4. Economies are interdependent which makes them more vulnerable to positive and negative impulses from abroad.

5. The wrong cause for the disease and the wrong way to deal with it entails risk.

6. The tensions between states and within their structures are growing, so it is difficult to reach a consensus.

7. According to the majority, all of the faults in the economy are formed as a result of mistaken monetarist policies.

8. The digitalization of the economy enables the continuation of transactions on stock markets around the clock.

9. According to the author, all sources are related to economic policy, financial activity, business, educational systems etc.

 

9. In my view, the author showed the sources of current economic risks in detail. The author explained each source of economic risks clearly and emphasized the interconnection between risks and different economic situations. So, the author revealed the topic and the idea put in the article was reached.

I would rather consider this topic from another side, namely how they affect economic activity. Besides, I think that the author made the wrong conclusion. As for me, I would prefer to end this article with tips on how to avoid risks. Nevertheless, I find this article informative.