What is a significant risk associated with global markets compared to domestic markets?

The significant risk associated with global markets compared to domestic markets is indeed greater financial risks in global markets. This stems from a variety of factors inherent in global operations, including exchange rate fluctuations, political instability, and differences in regulatory environments across countries.

When businesses or investors operate internationally, they expose themselves to currency risk, where changes in exchange rates can impact the value of investments or returns on investment. Additionally, global markets may be influenced by economic events or conditions in multiple countries, which can lead to increased volatility. This contrasts with domestic markets, where the investor has a better understanding of local economic conditions and regulatory frameworks.

Furthermore, geopolitical risks such as trade disputes, tariffs, or unexpected changes in government policies can significantly affect operations in overseas markets, compounding the financial risks faced. This all highlights why it is often considered that financial risks are greater in global markets compared to domestic ones.