Factors that Impact Financial Risks in United Kingdom

Factors that Impact Financial Risks in United Kingdom
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Factors that Impacts Financial Risks in United Kingdom
Introduction
Financial risk management is one of the major challenges that most countries and organisation face today. According to Christoffersen (2012), financial risk management is defined as the umbrella for various risks that associates with finances within a country, organisation or any other institutions that deal with financial spending and transactions. For instance, a country may face financial risks through failure to settle its debts. In the presence of financial risk within a country or organisation, shareholders of the organisation face loss of money in case the organisation or country is unable to respond positively to the risks faced. As found by Danielsson (2011), financial risk within a country need to be taken serious through developing effective strategies to curb the financial challenges faced. Consequently, countries and organisations that face financial risks need to understand that there exist various factors that impact financial risks. Based on these factors, this paper provides adequate information on these factors and their financial impact to United Kingdom. Additionally, it provides solutions to these factors and various approaches towards dealing with financial risks.
Current Political Leadership and Stability of the United Kingdom
Since its formation, United Kingdom has been governed through a constitutional monarchy. According to the governing system of the United Kingdom, Waldron et al (2013) revealed that Monarchy of the United Kingdom is considered as the head of state while the United Kingdom head of government is the Prime Minister. Similarly, Ellram et al (2013) echoed that the politic system of the United Kingdom is a multiparty system; therefore, people have their choices of joining any political party during elections. Although, United Kingdom is considered to be a growing country in terms of its economic growth, the current political stability is below the expectation of the United Kingdom government and citizen among other countries and investors globally. For instance, Ellram et al (2013) revealed that the common currency used by the United Kingdom, Sterling is losing value against the dollar as a result the instability within the British government based on the increase fiscal deficits that the government is currently facing (Waldron et al, 2013).
According to the information released by the government on the current situation of the United Kingdom, political instability within the country shows no signs of dealing with huge deficits that the country is facing. Some of the possible courses of the problems that the country is currently facing include disagreement of the government and the opposition, poor leadership provided by the current government and ineffective strategies developed by the management team towards the governing of the country as found by Waldron et al (2013). Based on the current situation facing the United Kingdom, the country may loose investors’ interest due to uncertainty in the improvement of the United Kingdom. Other businesses and organisations also find it difficult to use and target United Kingdom as their target market because of the fall of the Sterling against the Dollar. Hence, the current situation of the country, United Kingdom, has great negative impact on the financial status of the country.
United Kingdom’s Government Attitude towards foreign Investment
For over many years, United Kingdom has remained one of the most targeted marketing points for most organisations and their respective countries. According to Perria (2013), despite facing huge deficits, the expectation and attraction of investors within the country still records a high number. Through foreign investment, United Kingdom government has benefited in many ways. For instance, through foreign investment, the country has managed to collect enough revenue annually that helps in the United Kingdom development. Based on these advantages of foreign investment, the government has managed to give foreign investment a priority through enforcing better rules and regulation to enhance foreign investment as found by Perria (2013). Through foreign investment, United Kingdom has managed to create more employment opportunities to their citizens as they provide labour to investors by working in their organisations. Additionally, by encouraging foreign investment, United Kingdom has realized better industrial and infrastructure development to enable easy access to market. Therefore, the government of the United Kingdom remains a focus on foreign investment towards the realization of financial stability within the country (Perria, 2013).
Demographic Trends
Based on the 2010 censure results of the United Kingdom, the total population of the country was approximately 63, 182, 000 persons. The results of the findings show that the country stands at 3rd among the largest countries within Europe Union. According to Baumohl (2012), United Kingdom has the highest literacy globally which falls within 99 percent for persons above 15 years of age. Being a country with the higher population and high level of literacy, United Kingdom faces low employment opportunities for its members making the country face high financial risks currently. High financial risk has resulted due to high spending realised within the government as a result of huge debt that country is in the process of settling. According to Manuele (2013), high presence of financial risk has lowered the United Kingdom currency making it difficult for the country to have better economic development.
Fig 1: Population of the United Kingdom based on the 2010 censure
Source: (Christoffersen, 2012)
Key Economic Indicators and Trends
Despite having many challenges, United Kingdom has had a positive economic growth for the past years with the current GDP has expanded at 0.8 and 1.5 percent based on the third quarter analysis. This shows that the economic growth of United Kingdom is stable and able to survive in the market through attraction of many foreign investors as found by Manuele (2013). Additionally, the country progress in terms of the economic growth shows that United Kingdom is able to respond to the financial risks that the country m...