Globalization and risk sharing are concomitant concepts that ensure smooth consumption of products and services of countries despite the fluctuations in the income of the inhabitants. A well-developed and secured financial condition in the domestic market ensures risk-sharing among economic agents in the countries.
Globalization offers risk sharing among various economic agents in the particular countries by establishing an improved domestic financial market. Global financing has also put in a lot of efforts in ensuring a smooth consumption of goods and services in the local market amidst the downfall in income level of the common people. Risk sharing program deals with mortgage insuring and offers permanent funding for the setting up of rental housing for different families. The risk sharing program takes place between KHC and HUD. KHC covers 25 percent of the insurance for any loss and HUD is responsible for the rest 75 percent of insurance for the same. The risk sharing program is usually opted by either new construction sites or the solid refurbishment of the apartment units.
Globalization in risk sharing system entails acceptance of financial inflows from across the globe as insurance for any financial crisis that might risk the country's economy at any point of time. Therefore, the risk sharing program has been designed to assuage the menace tagged with such crisis but according to global financing system, the domestic market should be open to the financial inflows from other countries. Various economic agents from different parts of the world works as a source of interconnection between different countries for risk sharing purposes. This implies the fact that globalization for risk sharing purposes should shift its focus from smooth consumption of goods and services to the welfare activities apropos reduction of risk in the country's economy. It should disconnect the contact between domestic consumption and income sector.
The risk sharing levels in various countries are confined even among the advanced industrial economies which prevent nations from taking full advantage of the welfare gains facilitated by financial globalization for risk sharing. The risk factor has increased to a considerable amount during the current periods of financial globalization. Understanding the risk sharing patterns in the economic sector of the country is of high importance along with ensuring volatile consumption fluctuations in the country's economy and also good amount of potential welfare activities of risk sharing which will stabilize such fluctuations. Globalization and risk sharing also includes international risk sharing program. For international risk sharing, there are 3 factors to be considered in terms of that. Firstly, to necessitate an integrated investigation in the risk sharing economies and analyze the emerging markets in the developing countries, secondly examine the changes caused by globalization and risk sharing programs in different countries and then interrelate them with the growth rate of financial flows, and thirdly to evaluate various cyclical measures undertaken by risk sharing programs with the help of experiments.
A known disadvantage of globalization on risk sharing issue is that, the global financing has not replaced the age-old risk sharing patterns with new and innovative ones. Also, the steps followed by globalization to ensure risk sharing welfare programs are not applicable to all developing countries as well as the emerging markets. A recent study on the same has proved that fostering increased risk sharing factor on the economy of the countries and also on the emerging markets is not so much beneficial as has been demonstrated earlier. An advanced econometric analysis has proved the fact that an increased openness to the financial inflows improves the risk sharing aspect of the country's economy but this impact of global financing on and risk sharing is not enjoyed by some countries across the globe as yet.
Globalization and risk sharing are commonly enjoyed through capital inflows such as FDI, portfolio equity, portfolio debt, etc. instead of bank loans and other forms of debts as they do not ensure effective risk sharing. A conglomeration of domestic financial liberalization and international finance integration is also quite advantageous for the risk sharing activities.
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