How Can You Manage
Global Financial Risks?

Why Soft Skills Matter

Hedging in forex is typically used to mitigate global financial risks, but did you know that you can manage risks without any technical knowledge? This is where soft skills come in and, by acquiring these crucial abilities, anyone who needs to address financial risks in a company operating globally can employ those abilities. This requires no financial or technical expertise and the soft skills are relatively easy to learn and implement in practice. Sure, knowing how to hedge your global financial risks can be an important ability but knowing how to use your soft skills can also pay off in some situations.

Soft skills allow you to effectively communicate, share knowledge, and seek assistance from more experienced people around you.
Being emotionally intelligent means working effectively under stress and making rational decisions even under serious emotional stress.
Adaptability allows us to quickly analyze the situation and make effective decisions in a new environment.
Networking and collaboration are critical to effectively assess a situation, get expert opinions and find effective solutions to manage global financial risks.
Effective leadership leads to effective management of situations where financial risks might arise suddenly without prior notice.

Soft skill development

Mitigating global financial risks depends greatly on technical skills. However, some other skills might help anticipate these risks and manage them without technical knowledge in the field. Developing soft skills such as interpersonal abilities can also help to connect with experts and share knowledge. Soft skills like emotional balance and decision-making under pressure are crucial to managing the psychological aspect of financial risk management, especially for international companies that must deal with several jurisdictions.

Emotional intelligence and decision-making under pressure

Emotional intelligence is a critical skill to manage risks and be productive when under pressure. The ability to recognize, understand, and manage emotions is tremendously important when operating in global financial markets or any other venture in life. Emotional intelligence will be useful in any sudden adverse movement in global financial markets. Here, you need to focus solely on mitigating the risks and avoid becoming emotional about risk management. During volatility, professionals who can stay calm and make rational decisions have higher chances of success.

Adaptability and flexibility

Adaptability is crucial in business and risk management. In today’s markets, everything changes fast and, without the ability to adapt quickly and stay up to date on important technologies and dynamics, failure is guaranteed. Adaptability means being ready and open to new information, learning from past mistakes, and staying flexible and focused when uncertainty hits. Traders and investors who can quickly adapt and adjust their portfolios when unexpected volatility hits, can manage their risks more effectively. Financial markets are uncertain, and exchange rates can fluctuate drastically in short periods when something important happens. Wars, pandemics, and geopolitical events can seriously shake stock markets and other financial markets as well.

Networking and collaboration

Interpersonal skills including communication and collaboration can help to manage financial risks by sharing information and expertise. This essential skill helps CEOs to communicate with experts, get necessary information in time, and manage risks effectively without the need to be expert in financial risk management. Anyone can adopt this method through networking and collaboration. Gathering diverse perspectives on the matter and making the most rational decisions can help managers to mitigate risks.

Leadership

Good leaders can build great teams where competencies are diversified. This initiative is a crucial when managing financial risks on a global scale. Successful financial leaders can guide their teams during uncertain times. When a company faces currency rate risks, strong leadership ensures its teams takes the necessary steps to hedge risk exposure, invest in the right instruments, and stay informed and alert about market conditions.

Let’s now examine some practical cases where CEOs and leaders effectively managed risks using their soft skills.

Practical cases of soft skills being effective in financial risk management

Great leaders and risk managers often succeed in global financial risk management using their soft skills rather than practical strategies. Here are the most impressive cases of leaders managing financial crises using communication, networking, emotional intelligence and other soft skills.

Elon Musk's Crisis Management at Tesla (2018)

In 2018, Tesla was in serious financial trouble. The company was plagued by financial and operational risks caused by production delays, growing debts, and shareholders pressuring the company. Elon Musk, the CEO of Tesla, is known for his technical expertise, but he succeeded because of his adaptability, resilience, and communication skills allowing him to effectively manage and mitigate all risks. Tesla is still operational today, and all other companies producing EVs are trying to compete with it.
Christine Lagarde's Leadership in European Debt Crises

Christine Lagarde demonstrated excellent leadership and negotiation skills during the European debt crisis. She was a managing director of the International Monetary Fund (IMF) from 2011 to 2019. When countries like Greece, Ireland, and Portugal were on the brink of financial collapse caused by unsustainable debt levels, Lagarde’s exceptional diplomatic skills allowed her to work with multiple stakeholders such as European governments, international creditors, and political leaders. She managed to craft bailout agreements that stopped the risk of broader collapse in Europe.
JPMorgan Chase and the London Whale Incident (2012)

JPMorgan Chase faced serious financial risks when it had a trading loss of over 6 billion dollars, caused mainly by excessive risk-taking by traders in its London office. The incident was later named the “London Whale” incident. This event caused serious damage to the bank’s reputation and financial stability. CEO of the bank at the time, Jamie Dimon, had to manage both the technical side and strategic leadership side of his situation. Dimon used his soft skills by taking responsibility for the incident and addressing shareholders. His transparent and problem-solving approach restored confidence in the bank. He implemented changes in risk management procedures and strengthened a more collaborative internal culture, which helped the bank to prevent similar issues today.
The 1997 Asian Financial Crisis and Mahathir Mohamad's Emotional Intelligence

In 1997, the Asian financial crisis hit Malaysia hard by speculative attacks on the country’s currency. This led to economic instability in Malaysia. Most nations turned to the IMF for assistance, but Malaysia’s prime minister, Mahathir Mohamad, implemented his own financial strategies which included capital controls to stabilize the economy. Mahathir’s decisions were not welcomed by the international markets, but his emotional intelligence and confidence in his decision-making helped Malaysia recover faster than its neighbors. Despite immense external pressure, his communication abilities helped him gain trust and confidence among local audiences. He focused on political and economic stability locally rather than waiting for outside help. Mahathir Mohamad’s case shows how important it is to be a good leader, be confident, and communicate with your electorate effectively despite how strong the external pressure might be.

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How Can You Manage Global Financial Risks?