Social
It is worth to note that organizations operate within society. According to Staudt & Coronado (2016), and it is through the efforts generated by the society members that organizations attain a considerable market base. Some organization in Mexico have developed mini-societies due to their significant impact on the public. Staudt & Coronado (2016) suggest that the social environment is composed of external and internal aspect components which will be discussed in detailed later. According to the existing research, social environment entails a series of elements including society member’s customs, behaviour, beliefs and practices. Staudt & Coronado (2016) enlightens that social context is naturally constructed and it the mandate of involved participants to coexist tactically to ensure a healthy living. Societies in Mexico have been confirmed to have varied social environments, but some tend to be similar across all active social groups. For instance, some cultures have identical beliefs, customs and behaviours. Staudt & Coronado (2016) clearly explains that a Mexican flying to the U.S may notice more similarity in cultures, beliefs and traditions as compared to the one who travelled to China. The above example brings forth an illustration that Mexico and the U.S share a considerable number of beliefs compared to China.
Staudt & Coronado (2016) provides a clear description between external and internal social environment. On its part, the external environment in Mexico is created with the help of the entire society components. There are business-related components that cannot be created by an organization alone, bringing the need to utilize society’s forces. Staudt & Coronado (2016) attest that organizations operating in multi-cultural environment find it challenging to meet the society’s demands due to unique values as well as sub-populations. On the other hand, the internal social environment is formed from within the organization. According to Staudt & Coronado (2016), the internal social environment comes a result of interaction among the participants within the organization. The article reviewed by Muller (2016) suggests that an organization’s staff have varied beliefs, customs and practices where they coexist during interactions to create a social environment. Importantly, it vital for one to note that organizations have the power to manipulate their internal as opposed to the external environment.
Risk analysis of the external social environment
Organizations in Mexico should critically analyze risks related to the external social environment to survive following market degradation. An extensive examination of the external social environment in Mexico will be attained by focusing keenly on social interest regarding consumer’s needs and wants. Their beliefs, values and preferences always influence the participant’s wants and preferences. Consumer’s changes in beliefs and values towards a particular product will, in turn, have a similar impact on the testes and choices. It worth to note that the population’s tastes and preferences concerning the magnitude of beliefs and values. According to Gledhill (2019), the organization should always put a close eye when it comes to analyzing the external social environment to ensure continuous improvement in sales volume. There are instances when consumer preferences changes are so broad that a company cannot manage. For example, consumer preferences may be as a result of prohibition laws by regulating bodies whereby the affected organizations cannot intervene, a situation which results in unmanageable risks.
Analysis of external social, environmental risks in Mexico should be put into consideration to identify the open opportunities. Social related business opportunities are identified through marketing and advertising strategies. Again, organizations can reduce risks associated with the external social environment by engaging in active marketing campaigns to boost the level of public relations. According to Gledhill (2019), effective use of marketing campaigns contributes significantly to reducing instances of risk through reshaping the image of an organization.
Risk analysis of the internal social environment
As stated earlier, analyzing the internal social environment in Mexico is among the primary consideration in determining risks associated with organizations. The internal social environment is created as a result of interactions among the employees in an organization based on their unique customs, beliefs and behaviour. Organizations are composed of regulations which set interactions limits to maintain a socially responsive and conducive environment. An organization should access the risk associated with deteriorated social participation, cohesion and capital. Culturally related risks occur as a result of reduced motivation and healthy interactions among the employees. As a result, managers consider the losses that can be incurred following a series of unhealthy social relationship. Importantly, it also vital to include opportunities related to healthy social interactions, including group cohesion and participation.
Financial
The financial environment in Mexico plays a significant role in building the economy of a particular country. According to Castillo-Ponce, Rodriguez-Espinosa & Gaytan-Alfaro (2015), the components which make up a financial environment tend to be similar across all the countries. For instance, in Mexico, the most vital components forming financial background include investors, firms and markets. Investors include an individual who has shown interest in a particular stock or capital and buys part or whole of it intending to make a profit within a specified period. Firms include organizations that are concerned about the trading of stock with interested parties in a view to gain from returns. On its part, the market can be defined as the platform which determines the rates and other requirements for engaging in business. Castillo-Ponce, Rodriguez-Espinosa & Gaytan-Alfaro (2015) further suggest that the financial environment is more favourable when a considerable number of players have invested vast sums of capital in the capital market.
Markets
The financial environment in Mexico is composed of markets where the trading of stock occurs. The capital is sometimes referred to as securities and includes bonds, derivatives and forex market. According to Castillo-Ponce, Rodriguez-Espinosa & Gaytan-Alfaro (2015), companies specializing mostly on trading securities should put more emphasis on analyzing risks. It is worth noting that organizations intending to venture into financial securities need to explain all the risks associated with the trading market. According to Madura (2020), the financial environment in Mexico plays a vital role in aligning market operations by creating liquidity and allocating resources. Notably, well-established companies depend partly on the trading of securities as part of the length of term investment. To this end, it is evident that risk associated with the financial market in Mexico needs to be critically analyzed to ensure the smooth and secure running of stock trading in future.
Investors
An investor can be an individual or an entity that commits a specific value of capital with a view of gaining from the returns. There are different reasons why investors in Mexico trade with securities or security exchange, including funding projects in addition to accumulating wealth. Individuals invest based on their preferences, risk tolerances time frames and living styles. To this end, it will be vital for investors in Mexico to consider risks associated with the ever-fluctuating consumer preferences. Madura (2020) opines that a change in investor’s preferences and testes may either impact investment decision positively or adversely. For instance, an investor may have much interest in a particular security or bond. As such, the organization dealing with that specific securities will gain significantly (Madura, 2020). Overall, an organization dealing with stocks should critically analyze the risks associated changes in investor’s testes.
Firms
In the financial environment, firms can as well be referred to as investment firms. It can be defined as trusts or organizations which are concerned about pooling the invested funds to gain from returns. Investment companies work under the control of the Securities and Exchange Commission (SEC). SEC is a form of entity that regulates all the operations regarding the investor’s relationship with firms. In Mexico, Mexican Stock Exchange is the body which is mandated by the state to oversee stock exchange trading (Madura, 2020). Among the stocks traded under the Mexican stock exchange include derivatives, equities and fixed income products. According to Madura (2020), organizations should evaluate keenly the risks associated with investing in the various stocks to maximize on profits. Importantly, firms should conduct a thorough analysis of the risks related to the multiple stocks to have a comprehensive view of most and less favourable trading instruments.
Financial instruments
Financial instruments in Mexico comes as a result of a contractual relationship between two parties. A financial instrument has a monetary value which aids in determining the impacts of risk attached to various securities. Madura (2020) suggest that financial instruments can be traded, created or modified. In simpler terms, financial instruments can be defined as a stock which is traded purposely to earn returns. Financial instruments are subject to creating liabilities hence bringing the need to analyze all the possible risks. Financial instruments can be classified into four types which comes in the form of cash, assets, debt-based and equity-related instruments. Madura (2020) enlightens that organizations in Mexico are required to classify financial instruments based on the short or long term. Securities that mature within a period of one year are categorized under short term while those having a maturity date of more than a year are classified as long term financial instruments. It is worth noting that risks vary based on the maturity of financial instruments in the sense that the allocated period may either lead to an increase or decrease on the anticipated returns.