Can Financial Data Entry Prevent Recession-like Situations?

Can Financial Data Entry Prevent Recession-like Situations?

Published On July 08, 2015 -   by

Accurate and timely financial analysis can provide a sound foundation for both stock market and business operations. In this article, DataEntryOutsourced reviews the role of a financial data entry system in increasing stock market stability – especially important in light of the recent suggestion by the International Monetary Fund that central banks throughout the world should be prepared to act as “market makers” in financial crisis conditions.

Data Entry and Our Financial Future

The relationship between investment risks and data management should be in the forefront of any analysis of stock market performance. After all, stocks and other securities involve an endless stream of financial data – errors regarding data management can easily result in a “Perfect Storm” of confusion and chaos in a market environment that often changes within seconds of financial reports being released.

Economic experts such as the International Monetary Fund have chosen to bring the importance of financial data entry to the forefront of public attention in an effort to avoid a repeat of market volatility increasingly seen since 2008. For example, “High Frequency Trading” is expressly based on rapid data analysis using financial algorithms – What if the data is wrong?

The Role of Data Entry in Overturning Stock Market Crashes

The stock market is designed to be an “efficient market” that quickly matches buyers and sellers. However, in a developing market crash, risk-averse stock traders often retreat to the sidelines and refuse to make reasonable bids – without the presence of meaningful buyers, stock prices decline rapidly.

The traditional role of a “Market Maker” is to precisely avoid the absence of a fair combination of buying and selling prices. However, computer trading has changed everything – market making has essentially disappeared in unstable market conditions. The International Monetary Fund has recommended that the world’s central banks step in as market makers when this happens. This involves using the virtually unlimited financial resources of the U.S. Federal Reserve Bank and other central banks. If they don’t do this, who will? Investment risks and data management do go hand-in-hand and must periodically be “managed” to alleviate excessive market volatility.

Are Global Financial Risks Harder to Spot?

Spotting financial risks has always been a challenge – adding to the difficulty is that these risks are evolving and changing. According to the head of the International Monetary Fund’s monetary and capital markets department, global financial risks have “rotated” in three ways:

  • From advanced economies to emerging market economies
  • From solvency risks to liquidity risks
  • From banks to non-banks

The changing profile of financial risks for stock markets means that central banks might be the only institutional entities capable of taking quick and decisive action to prevent stock market crashes. However, the European Central Bank and the U.S. Federal Reserve have both exhibited the limitations of relying on central banking authorities without creating unwanted “side effects” – but an accurate and timely financial data entry system can reduce and minimize many unwanted problems.

How to Keep Stock Prices from Collapsing

One of the most powerful tools available to any central bank is “monetary creation” – effectively creating money with the “stroke of a pen” (in this case, with the stroke of a keyboard). In extreme situations, banks could create enough “new money” to buy all outstanding stocks and bonds.

The absence of an “orderly market” is what commonly creates financial crashes of any kind – from gold to stocks to real estate to oil. Many market crashes are also related to a looming over-valuation of the underlying investments – some experts would argue that many crashes are a “natural” step in finding the “right price” for an investment. This raises questions such as the following: Should central banks act as an “artificial” force in preventing downward price movement?

Maintaining Financial Stability

Financial stability is a necessary ingredient for both investment markets and commercial enterprises. One of the most practical strategies for achieving this stability is to improve the financial data entry process.

While your business enterprise is not the Federal Reserve Bank or another central bank, you can still reduce investment risks and reduce flawed data by adopting a sound financial data entry system when you outsource to data management experts like DataEntryOutsourced. Please leave your comments about data entry below and share this article by using the social media buttons.

– DataEntryOutsourced

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