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    Financial Risk Management: Economic Downturn 2007

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    I need background information where a globally invested business failed to mitigate global risk in the financial crisis beginning in 2007 and determine the financial risk considerations of globalization in the financial crisis that started in 2007. Need specific focus on:

    * The context of the case researched.
    *Metric-based financial risk analysis.
    *Examples of what went wrong and what went right.
    *Recommendations as to how the issues must be resolved by the organization and by international governmental regulations.

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    Solution Preview

    In accordance with BrainMass standards this is not a hand in ready paper but only background help
    Step 1
    One globally invested business that failed to mitigate global risk in the financial crisis was American Insurance Group, an American multinational insurance company with customers in more than 130 countries. The financial risk consideration of globalization that led to a financial crisis in 2007 and 2008 was that AIG took on tens of billions of dollars of risk associated with mortgages. It insured tens of billions of dollars of derivatives against default but did not purchase reinsurance to hedge that risk. In addition it used collateral on deposit to buy mortgage backed securities. When there were losses in the mortgage market in 2007 and 2008, AIG was compelled to pay insurance claims and also replace the losses in its collateral accounts.

    Step 2
    Based on metrics, in the year 2008 AIG incurred ...

    Solution Summary

    This posting gives you a step-by-step explanation of how a globally invested business failed to cover its risks and was hit by the economic downturn of 2007. The response also contains the sources used.