interest rate policy. you, the private sector, analyse this information and act upon it. unlike the situation in the past, when international businesses were led to believe that the future path of exchange rates was predictable, today we have a more realistic situation in which the business community knows that shocks can occur, and that what is predictable is the way in which the central bank will react to them. in addition to a more stable international monetary order, this new paradigm has brought us many other advantages : lower inflation, lower real interest rates and lower international spreads are additional achievements. after decades of high inflation and even recurrent episodes of hyperinflation in various emerging markets, the last ten years have been marked by low stable inflation in most caramazza, f. and j. aziz ( 1998 ), fixed or flexible? getting the exchange rate right in the 1990s ', imf, economic issues 13, april. eichengreen, b. and raul razo - garcia ( 2006 ), the evolution of exchange rate regimes, economic policy, july, pp. 309442, table 1. countries of the world. price stability has benefited all. consumers benefit, of course, because their income is no longer eroded by price growth. but producers have also gained because price stability helps them to plan ahead. lower inflation and confidence in central bank policies have, in turn, reduced uncertainty about future price developments. the lower inflation risk premium is allowing even industrial economies to grow at lower real interest rates than in the past. and, finally, an unambiguously beneficial consequence of the new international monetary order is that it allows for more efficient distribution of capital. at the same time as the current polarisation of exchange rate regimes has come into being, financial globalisation has intensified. capital controls are being lifted in a growing number of developing countries. in the 1970s, net flows of private capital to the world's poor countries amounted to a little over 1 % of host - country gdp. 3 by the end of the 1990s, this percentage figure had grown by a factor of three. today, there is a broader acceptance of the benefits to be derived from financial liberalisation. indeed, the gains expected from a free market for international capital are substantial. global finance allows for a better allocation of world resources, enhancing the prospects for growth of all nations. for richer countries of the world, there are new investment opportunities to finance the expanding needs of their aging populations. younger and poorer nations obtain access

it will look like a curse when foreign investors head for the door. the present monetary order is more resilient than the previous regime of fixed exchange rates, but crises can still occur, and if they occur they are more likely to be extensive and spread rapidly. and globalisation, of course, goes far beyond financial integration. global companies are located all over the world. they have to deal with different legal frameworks, with different business cycles, with different political realities. the range of risks to be met by international business is thus far broader the economist, global finance survey may 2003. than in the past and demands permanent monitoring and continuous improvement of risk management at all levels. financial, operational and reputational risks are all new by - products of globalisation, and we are only just beginning to come to terms with them. a survey of corporate directors quoted by the economist in 2004 showed that a clear identification of risks is still too difficult for many well trained ceos : 36 % of the corporate directors polled actually admitted that they did not fully understand the risks faced by their company. implications for the private sector with globalisation, your lives have undoubtedly become more difficult. operating at a global level is infinitely more complex than the regional approach of the past. globalisation is a challenge for business management. it entails many sources of uncertainties but also offers many vehicles to cope with risk. can we beat these new risks? no. we must prepare ourselves to face them. we can only insure against some risks, but we cannot predict where the next blow will come from. i think that this is the most important characteristic of our times. what has increased is not our insecurity. we are, in many respects, safer than in the past. this, i hope, is what i have managed to convey to you. my conviction is that the world today is better managed than in the past and, in that sense, is safer. what has increased, however, is the magnitude of a potential crisis. this is what i refer to as uncertainty. the big challenge for international business of today is to learn to live with uncertainty. and in this domain we still have a way to go. nowadays, our difficulties in dealing with uncertainty permeate all our discussions about the responsibilities of different private and government agents. i perceive an understandable – but in my opinion misconceived – nostalgia for a world that used to appear safer, thanks to regulation. we hear demands for the