THE IMPACT OF THE GLOBAL FINANCIAL CRISIS

The impact of the Global Financial Crisis

The impact of the Global Financial Crisis

Global Financial Crisis

World financial crisis of 2008 is the financial and economic crisis, which appeared in the form of a very large deterioration in key economic indicators. In most developed countries, and followed later that same year, the global recession (Agénor, 1999, Pp.32-34).

Companies decreased significantly for the possibility of obtaining capital for securities offering. By early 2008, the crisis has been global in nature and gradually began to manifest itself in the widespread decline of production, reducing demand and prices for raw materials, rising unemployment (Adams, Robert, 2000, Pp.72-76).

The impact of the Global Financial Crisis has had a great effect on the conduct of an entity

The impact of global financial crises has diversified affects, mainly on the business and economy of the country. As it occur it make all the company's director and management to check their actions and responsibilities accordingly, if they doesn't make necessary measures there is a chance that they might face a crucial and complex situations (Addison, 2001, Pp.15-19).

What has been observed is that the impacts of financial crises are negative, and the effect was largely dependent on a range of internal and external variables. Countries that are trade partners, for instance, their trade relations can be break down (Adalet, 2004, Pp.41-45). It is very necessary for the organization's management to take corrective measures in the situation of global financial crises because it impacts on many areas such as:

Origins and causes

The emergence of the crisis was associated with the following factors and this has to be corrected by management.

High commodity prices

As the prices of commodity increases, it affects the working conditions, which are need to be in focus in order to control the situation. The management should work on this factor as it make their expenses increase as well as worker working demand for higher salaries (Abdelal, 2001, Pp.93-97).

Down-Sizing Concept

As financial crises occurred it caused Down-sizing in the organizations as there was very low trend in the business and organizations could not bear their operational expenses.

Goals and targets of organizations were misplaced

The organizations goals were misplaced as the financial crises evolved, management has to make new target and goals for their corporation in order to retain them in the market.

All these causes should be corrected in order to create a “good Corporate Governance” (Demb, Neubauer, 1992, pp.65-72).

Corporate Governance

The concept of corporate governance is the set of principles, and rules governing the design, integration and operation of the governing bodies of the company, as are the three branches within a society: Shareholders, Directors and Senior Management. Good corporate governance provides incentives to protect the interests of the company and shareholders, monitoring value creation and efficient use of resources (Clarke, Clegg, 1998, pp.36-39).

The concept appeared decades ago in most developed countries of Western Europe, in Canada, the United States and Australia, as a result of the need of the minority shareholders company to ...