Economic Environments and Risk Mitigation

Milestone Two
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Milestone Two
II. Economic Environments and Market Conditions
The global financial markets refer to platforms wherever individuals, groups, and nations trade financial assets. Many also consider it an avenue with rules that govern the trading of the assets in question. The international financial markets have a role in ensuring the effective sharing of risks amongst the investors involved. Therefore, they play a considerable role in Amazon’s risk management processes as it engages in. These markets help allow investors or companies to diversify some risk and as well provide an extensive set of financial tools with very distinct risk-return connections. Such a situation allows individuals to select their investments’ risk profiles in relation to their risk-tolerance intensities (Amazon, 2021).
           The exchange rate can influence any company’s performance, and Amazon is no exception. For example, an unfavorable exchange rate caused the giant online retailer to record undesirable results regarding its 2012 fourth-quarter revenue. This was mainly due to the euro becoming weak. The corporation warned recent companies like Eli Lilly and Pfizer that a drop in the euro’s strength could make them record undesirable results, denoting an effect on sales and profit. The multinational firm has been constantly worried about a euro-based economic weakness. The CFO noted that the currency devaluation affected the company’s growth rate. Amazon testified to 35% global revenue growth in the last quarter. However, the number drops to 34% when dismissing $101 million from alterations in the exchange rates (Monga, 2012).
III. Risk Mitigation
           In the contemporary age of intensifying currency volatility and globalization, significant alterations in the interest and exchange rates usually significantly impact the firms’ profitability and related financial processes. Many elements are responsible f...