Geopolitics, macroeconomics, epidemics and other factors that influence investment criteria can matter so much on a global scale that a proactive approach – with broad diversification and regular tinkering of your portfolio – is the best strategy to stay a step ahead of the risks and opportunities that the world offers.
And indeed, global events can further be useful as they depict global reactions and local actions that are interdependent, one underpinning or triggering the other, and governing the world we live in. This short piece provides a description and discusses global events as a catalyst for local development.
Economic Impact
Political tension and economic shifts can ripple through the world of investing as well, shifting the parameters of good performance. In times of uncertainty, investors who want to feel stable financially can diversify even further.
Dollar beds A key element of the event ecosystem, and one which is a popular domain for private investors, is the venue. Every type of venue is a potential opportunity: from concert and sporting arenas to international convention centres and national theatre houses. Investors can expect high-return profiles and exceptional revenue visibility, with 60-80 per cent booked 12 months in advance. Leveraged buyout activity accounts for fully a third of the sector, with six of the world’s 20 global exhibition organisers now in private equity hands. COVID-19 put a halt to growth across the board, but deal activity has picked up again since, and with companies reporting high levels of cash flow, pent-up demand is being met.
They rely on proxies such as the direct economic impact on the host economy, which the public sector bodies and the organisers increasingly try to maximise. Indirect and Induced expenditures should also be included; this is an additive measure of the expenditures attributable to hosting events through detailed input-output table and multipliers that reflect the distinct features of each host economy.
Social Impact
On the other hand, global events promote international understanding and cooperation, while gathering people from all over the world to share the enjoyment and festivities. Moreover, they can contribute to the economic development of a nation by attracting visitors from all around the world. To begin with, international competitions enable athletes from different regions to compete with each other, thus promoting cross-cultural understanding and setting an example for international cooperation. In order to demonstrate the outstanding achievements of both athletes and host nations, huge numbers of foreign visitors are expected in towns and cities where global events are held, thus accelerating the economic development of host countries. On the other hand, international events can enrich local residents as well. Such occasions provide an opportunity to showcase the unique customs and traditions of a country to the rest of the globe. As people experience different cultures and become friends, global events become an effective and lasting bridge between countries. To conclude, it is evident that international competitions can contribute to the economic developent of a country while also fostering cross-cultural understanding.
This social impact can be measured in diverse manners – by using indicators that tap into overarching theoretical frameworks of social exchange theory; social representation theory and growth machine theory (see Deery and Jago, 2010).
The OECD Recommendation sets out a roadmap for event-hosts to make the most of their global event, while its Toolkit puts this advice into action, suggesting practical actions for event-hosts to take at every stage of planning and delivery: the key to a sustainable event lies in leveraging local benefits.
Political Impact
Economic events of global significance could create important waves. If they impact investor sentiment and market psychology, they could have a significant effect. Investors should be careful about the way they react to economic news because their hasty decisions could induce knee-jerk reactions. Short-terms swings could be more affected by investors sentiment. Diversification and having a disciplined investment strategy will certainly help investors to avoid significant losses.
Policy matters can exert considerable influence on markets, including those related to monetary policy, which includes everything from setting the interest rate to injecting cash into the market, and fiscal policy, which includes government spending and taxation. In times of heightened policy uncertainty, including about future government policies that might influence economic growth and regulatory environments, financial markets can become more volatile. For example, supply chain disruptions and reductions in consumer spending due to COVID-19 hammered stock prices.
Keeping a global eye on how ecological changes unfold, as well as the likelihood of future political events and conflicts, can enable you to refine your investment criteria and to choose (and protect) your positions wisely, capitalising on against threats. You need to become aware of political stability, market volatility and currency fluctuations to make informed choices.
Environmental Impact
Environmental events can potentially affect business investment decisions in at least three ways. They could alter natural resources, could impose future development restrictions through regulatory penalties, or damage corporate reputations (ie, valuation discounts) due to environmental event impacts.
The literature on environmental policy and competitiveness can be divided into two camps. One is based on trade theory. If differences in environmental policy stringency are large enough, firms will reallocate the production of pollution-intensive commodities towards regions with lower abatement costs, and if those regions are located in different countries, ‘pollution havens’ are created and ‘pollution leakage’ is said to occur.
These merely confirmed the findings of many economists’ formal models and studies (Jaffe et al 1995a; Kozluk and Zipperer 2014) that show more productive firms (those above the mean) enjoy greater rents from regulatory-induced technological change, thereby offsetting what worsens relative costs. Moreover, productivity gains from policy-induced learning in clean technologies could lower long-run abatement costs, making asymmetric environmental policies more economically palatable.
