Written by Sveta Shao in November, 2008

On Tuesday, 16 September 2008 insurance giant – America International Group (“AIG”) neared collapse, which prompted further panic and stress on global financial markets.

The share price of AIG – a company with one trillion dollars in assets and tentacles in many markets, was reduced by more than 60 percent on 15 September 2008.

Different from other insurers, AIG has been a big player in a complex parallel market named – “Credit Default Swaps (CDS)”; relative to financial instruments in which Wall Street Companies take out as a form of market insurance against the risk of bond default.

This kind of product often has close links to the US real estate market, which is in decline, and as a consequence is the major cause of current banking crisis leading to massive write-down of assets’ value around the world.

AIG alone has written off 25 billion US dollars amid spiking defaults on US mortgage payments in the United States.

If AIG is placed into liquidation, it will impact upon its subsidiaries operations around the world, and could deepen the global financial crisis. The US Federal Reserve announced an unprecedented rescue loan of up to 85 billion US dollars to save this insurance giant.

In order to improve the financial markets movement and regain investors’ confidence, Reserve Banks around the world, including Reserve Bank of Japan and most European countries have already injected approximately 300 billion US dollars into the finance markets around the world between 15 September 2008 and 17 September 2008.

No doubt the global finance market is facing severe financial crisis. The recent collapse of Bear Stearns, Lehman Brothers has further stressed the world finance market.

Maybe it is the time for all business owners to stop and think “Is my business healthy? Am I on the right track? Or, should I seek professional advice?”

Failing to plan can lead the plan to fail. Make sure you take a proactive approach to looking after your business. The combination of a good plan, early action and appropriate advice can provide the best solution for business recovery.